Article 52 - Capital Assets

1. A Taxable Person shall adjust previously deducted Input Tax in relation to a Capital Asset in cases where the Taxable Person’s Input Tax decreases or increases as a result of a change in the way the Taxable Person uses the Asset, or a change in the VAT status of such use.

2. The Adjustment Period in respect of which adjustment under this article is required is six (6) years in respect of moveable tangible or intangible Capital Assets and ten (10) years in respect of immovable Capital Assets which are permanently attached to land or Real Estate, starting from the date of purchase of the Capital Asset by the Taxable Person.

Should the life of the apital Asset determined in accordance with the accounting practice of the Taxable Person be less than the otherwise corresponding Adjustment Period, the Adjustment Period shall instead be the life of the Capital Asset, with any part years counting as one year.

3. At the time a Taxable Person acquires a Capital Asset, Input Tax shall initially be deducted in accordance with the intended use of the Goods. During the Adjustment Period, an adjustment to the deduction must be made following any year in which the actual use of the Capital Asset differs from that initial intended use. Capital expenditure incurred on a Capital Asset already owned by the Taxable Person (to construct, enhance or improve it) counts as expenditure or additional expenditure acquiring it and the Adjustment Period (or additional adjustment period) for such expenditure shall commence on the date of completion of such works.

4. At the end of each twelve month period, as calculated in the fifth paragraph of this article, a Taxable Person shall calculate the amount of Input Tax potentially subject to adjustment using the fraction:

Initial Input Tax deduction Adjustment Period

and shall make an adjustment to the amount of the Input Tax deducted, based on the actual use of the Capital Asset during that year. 

5. For the purposes of the fourth paragraph of this  article, the first twelve month period shall commence from the start of the Tax Period in which the Capital Asset was acquired, and each subsequent twelve month period shall begin following the end of the preceding twelve month period for that Capital Asset.

The Taxable Person shall make the adjustment to Input Tax in the Tax Return for the last Tax Period which falls in the twelve month period, and shall accordingly either claim an additional amount of Input Tax or make a repayment of Input Tax.

6. In cases where there is no change in the use of the Capital Asset from the initial intended use in any year, the Taxable Person is not required to adjust Input Tax in respect of that Capital Asset for that year.

7. In cases where there is a permanent change in the use of a Capital Asset due to the sale or disposal of the Capital Asset by a Taxable Person, the Taxable Person must adjust the Input Tax deduction for the remainder of the Adjustment Period for that Capital Asset in the Tax Period in which it is sold.

No adjustment to the Input Tax deducted for the remainder of the Adjustment Period is needed if the Capital Asset is destroyed or stolen or ends its useful life earlier than accounted for.

8. In cases where there is a permanent change in use of a Capital Asset due to that Capital Asset no longer being used for the Taxable Activities of that Taxable Person, no adjustment to Input Tax is made but the Taxable Person shall be considered to make a Nominal Supply of the Capital Asset in accordance with the Agreement. The value of such Nominal Supply shall be calculated using the following formula:

(Purchase value of Capital Asset x Initial Recovery Percentage x Remaining Useful Life) Adjustment Period

where the Remaining Useful Life is the Adjustment Period determined in accordance with the second paragraph of this article less the number of part or full years during which the Taxable Person has used the Capital Asset, and the Initial Recovery Percentage is the recovery percentage determined in accordance with the intended use of the Goods at the time of purchase as calculated in accordance with this article.