The taxable person can deduct from the tax payable the input VAT if the following conditions are met:
- the services or goods acquired are used for the taxable transactions of the taxable person and,
- the taxable person holds a document (invoice, import document etc.) verifying the tax charged, issued in the name of the taxable person.
There is no right to deduct input VAT where the goods or services acquired are used for tax exempted transactions. However there are tax exempted transactions with right to deduct, such as export and like transactions, international transport, exempted Intra-Community supply of goods. The tax exempted transactions without right of deduction include inter alia insurance, financial services, postal services, human health care, education, public radio and television broadcasting, some sport services, gambling services, letting and leasing of immovable property etc.
It is prohibited to deduct input VAT on the purchase of following goods and services even when it is used for business purposes:
- fuel used for the passenger car,
- leaded or unleaded motor fuels, except when (as of 1st January 2011) those are used in the course of experimental development for new technological developments
- supplies of passenger cars,
- goods and services related to the operation or maintenance of the passenger car,
- motorcycles of engine capacity exceeding 125 ccm, yachts, sport and pleasure boats,
- foodstuffs and beverages,
- restaurant, confectionary and similar services,
- entertainment services,
- supplies of residental properties
- goods and services related to the construction and renovation of housing,
- 30% of input VAT on phone services (including mobile phone services and Internet-protocol-based voice transmission services)
- parking fees and road tolls except the parking fee and road toll for cars weight of which exceeds 3,500 kg,
- taxi services.
Until 31 december 2011 it was prohibited in our legislation to deduct input VAT in connection with hire of passenger car, motorcycles, yachts, sport and pleasure boats. As of 1st January 2012 the taxable person, who rents the abovementioned vehicles, can deduct the input VAT.
However in many cases if those purchases are effected for resale, or used as being included in the taxable amount - shown under material costs - of the supplied service, or if the services are procured with a view to the supply of services where the taxable person is acting in his own name but on behalf of another person the tax is deductible.
For example, there is no prohibition of tax deduction on goods and services related to the construction and renovation of housing, where the taxable person is engaged in construction for resale. By way of derogation from the abovementioned regulations, the taxable person is allowed to deduct the input VAT of the passenger car, if it is purchased for the purpose of relsale, or used for the supply of taxi services, or for leasing or letting. The prohibition of deduction of VAT related to car operation and maintenance does not apply if the goods are effected for resale, or if the services are procured with a view to the supply of services where the taxable person is acting in his own name but on behalf of another person. Furthermore, the VAT of these goods and services is deductible, if used as being included in the taxable amount - shown under material costs - of the supplied car leasing service.
The input tax on supplies of residental properites is deductible as well, if those purchases are effected for resale, but if the supply of the residental property according to general rules is exempted from VAT, it is necessary that the supplier opts for the taxation in order to be able to deduct the input VAT.