Taxing the future: deductible VAT on mobile phone expenses – News

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It would be helpful if a business could recoup the entry credit on the fixed monthly rental without monitoring actual usage and forfeit the VAT credit on excess usage, if applicable.

By Pankaj S. Jain

Posted: Fri 24 Dec 2021, 23:30

Last update: Fri 24 Dec 2021, 23:32

The Federal Tax Authority (FTA) has released a public clarification (VATP028) on cell phones, airtime and data plans (“MP, A, DP” for convenience) made available to consumers. employed for professional purposes. This is a pragmatic step by FTA to clarify VAT’s position on the issues faced by all taxpayers as a whole.

A potential personal use of MP, A, DP cannot be excluded, thus limiting the recoverable input VAT on these elements. The public clarification has given a clear path for the collection of the input tax of these expenses.

In essence, a company has the right to recover input tax on MP, A, DP only if the following conditions are met: the company is registered for VAT; Company name and tax details are reflected on tax invoices which are duly kept; A strict documented policy is in place to restrict the use of MP, A, DP for commercial purposes and sets out the consequences for any personal use; The use of airtime and fixed prices must be regularly checked and the justification of the discrepancies must be kept; and Action should be taken against employees for personal use in accordance with documented policy

Careful reading of VATP028 also raised doubts among taxpayers.

Scope of the clarification?

VAPT028 indicates that it covers the situation where companies have entered into agreements with telecom operators to make MP, A, DP available to their employees. Although airtime and data plans are always contracted with the operators, the telephone instrument can be contracted or bought on the open market.

If the clarification covers business assets purchased on the open market, the “potential personal use” argument could be extended to other items such as laptops, uniforms, bags, safety shoes, etc. . provided to employees. Restricting the input tax on these items could result in additional costs for businesses.

Monitoring of use in fixed rents?

The clarification states that companies should acquire packages based on historical / expected business requirements. Thereafter, any airtime and data used beyond the plan would be considered non-commercial use, unless robust monitoring is in place to justify actual use or employees are charged for the time. ‘surplus.

Most telecom plans provide a specified, or even unlimited, airtime / data allowance for a fixed monthly rental. Excess use is billed at the actual rate.

It would be helpful if a business could recoup the entry credit on the fixed monthly rental without monitoring actual usage and forfeit the VAT credit on excess usage, if applicable.

Monitor data usage?

Although airtime usage can be examined using dialed phone numbers, practical difficulties could arise in monitoring data usage. Usage details would not list websites visited or messages sent on communications apps.

Expenses incurred by employees less than 10,000 Dhs?

Employees often incur expenses of less than 10 000 Dhs for their company which are then reimbursed by the company. They receive tax invoices either in their name or without any name. These invoices are often treated as simplified tax invoices and the input tax credit is duly recovered by the companies. Mobile phone bills are also generally less than 10,000 Dhs. The clarification requires that the tax invoice be in the name of the business and contain its details. If a similar condition is applied to other business expenses incurred by employees, companies could experience significant tax losses on low value expenses.


Express guidance from FTA on the above issues will be very helpful and facilitate the administrative efforts of companies on low value expenses. Companies could also contact FTA for private advice / clarification on their specific tax issues.

The author is the Managing Director of AskPankaj Tax Consultants. For any questions, you can write to [email protected] The opinions expressed are his own and do not reflect the policy of the newspaper.

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