Recovery Rules
General Rule: Input VAT is recoverable to the extent it relates to taxable supplies (standard-rated or zero-rated). Input VAT on exempt supplies or non-business activities is not recoverable.
Office rent, professional fees, IT equipment, marketing costs for taxable activities
Mixed-use expenses requiring apportionment between taxable and exempt supplies
Employee entertainment, personal expenses, non-business costs, cars (unless trade)
Apportionment Methods
📊 Standard Method
Revenue-based apportionment: taxable turnover ÷ total turnover × residual input VAT. Most commonly used and NBR-approved default method.
🔧 Special Method
Floor area, headcount, or transaction count basis. Requires pre-approval from NBR. Useful when revenue basis doesn't reflect actual use of inputs.
📋 Direct Attribution
Costs directly linked to taxable supplies = fully recoverable. Costs directly linked to exempt = no recovery. Only residual costs need apportionment.
Common Rejection Reasons
❌ Invalid tax invoice (missing TRN, wrong format)
❌ Claim outside 5-year limitation period
❌ Expense not related to business activity
❌ Blocked input tax category (entertainment)