Tax laws to prohibit outsourcing – Input VAT paid on outsourcing services is not creditable

The Bill would not allow input VAT paid on outsourcing services to be creditable, which would be consistent with the requirement that a VAT credit is generally only allowed if the underlying good or service is deductible.

The Bill also would prohibit a VAT credit and income tax deduction for payments for services in which employees are transferred to the subcontractor from the original employer, to the extent these employees carry out the contractor’s principal activities.

Additionally, input VAT paid on services of a specialized nature or the execution of specialized work would be creditable subject to certain documentation requirements.

Source EY

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