On 21 January 2020, the Director General of Tax (“DGT”) issued a Circular Letter No. SE-02/PJ/2020 regarding the Crediting of Input VAT in a different tax period (“SE-02”).

Basically, the DGT issued this SE-02 in order to provide confirmation regarding the mechanism for crediting input VAT in a different tax period as regulated by Article 9 paragraph (9) of the VAT Law. Disputes over crediting input VAT in a different tax period commonly arise due to different interpretations of the elucidation of Article 9 paragraph (9) of the VAT Law. In the past, there were many cases in the event of a tax audit whereby crediting input VAT in a different tax period through the revision of VAT returns was not acceptable to the tax auditors, who maintained that the crediting of input VAT in a different tax period can only be done through submission of a normal VAT return. The elucidation of Article 9 paragraph (9) of the VAT Law should no longer be open to different interpretations, as SE-02 has provided a confirmation on this issue in its examples of cases.

The key points that are confirmed by SE-02 are as follows:

• Input VAT can be credited against the Output VAT in the same period;
• Input VAT that is creditable but has not been credited against Output VAT in the same period can be credited in the next tax period for no more than three months after the end of the relevant tax period. In the event that this three-month period has expired, the Input VAT can be credited through revision of the VAT return concerned;
• This provision is also applied to certain documents that are treated as equivalent to a VAT invoice;
• Crediting Input VAT can only be done if:
  1. the Input VAT has not been charged as a cost and has not been capitalized in the acquisition cost of the relevant Taxable Goods or Taxable Services;
  2. the VAT-able Entrepreneur has not been audited by the tax authority.