Yes, we’ve covered this topic in the past, and we even used the same title. But… although the title is too good to change, this seminar will be, once again, a little different.

The Chelco VAT International Academy continues its series of high-level VAT educational events with a morning seminar focussing on specific aspects concerning the application and complexities of the Right to Deduct VAT.

In this ‘deductions’ seminar, we will slowly analyse the theory behind the ‘deductions’ system in the world of VAT. The idea is to build up the reasoning of why deductions exist, and how they should be made, detailing our 3-step approach! 

The holistic view that will transpire by the end of the seminar should clarify the main criteria as to whether a deduction is allowed, with a special view of the Cyprus VAT legislation, as well as the practical methods of calculating the allowable deduction, especially with regards to non-economic activities (including the pre pro-rata method) and exempt activities (including the pro-rata method), as well as the possibility to apply different methods.

The Right to Deduct VAT is the single most important aspect of the VAT legislation. The deduction system is meant to relieve traders entirely of the burden of the VAT payable or paid in the course of all their taxable economic activities. The European Court of Justice (ECJ) has ruled time and time again that the Right to Deduct is a fundamental right of the taxable person and cannot be limited.

However, the increased complexities of the number and types of transactions that businesses undertake today can lead to errors in input VAT deductions, and disagreements with the VAT authorities, which can consequently become very costly for the taxable person. Having a solid understanding of the deduction system is therefore paramount.

The seminar will cover the following:

• An explanation of the main provisions in the Cyprus VAT legislation and EU VAT Directive regarding the right of deduction
• Understanding the difference between an economic activity and a non-economic activity
• An explanation of the 3-step approach to deductions
• Understanding how to apply the ‘direct and immediate link’ test between a cost (and its input VAT) and an activity
• Understanding the underlying philosophy of how and why to apportion input VAT relating to non-economic activities, and examining different methods which may apply
• Understanding the available methods for the pro-rata apportionment of common expenses (for exempt and non-business activities that do not allow a right of deduction)
• In all aspects of the seminar, where possible, we will analyse decisions of the European Court of Justice that emphasise the points made
• As always, several examples will be presented and solved

The seminar is open to any professional with exposure to VAT matters such as accountants of all levels, chief accountants, CFOs, financial controllers, VAT advisors, auditors, tax lawyers, tax advisors, et al.