Taxpayers are not required to adjust input tax deduction in case of loss, damage, or theft of goods.
To prevent fraud attempts and eliminate doubts, the Executive Regulations included a provision stating that the taxpayer must declare goods that were lost, damaged, or stolen in the same manner as declared in their accounting records and books to prove and support the input tax deduction for those goods.
The authority may request additional evidence related to loss, damage, or theft, including, for example, a police report and insurance documents.
Example: In August 2020, Al-Hussam Mechanical Works Company purchased (50) car light bulbs for use in car repairs at a price of (50) Saudi Riyals per unit – excluding VAT. The total purchase amounted to 2,875 Saudi Riyals (2,500 + 375 VAT). Two weeks later, an employee accidentally dropped a set of bulbs, rendering them unusable. There was no insurance on these units.
The company recorded them as damaged goods after approval from the management in its accounting books. Therefore, Al-Hussam Company can deduct the VAT (375 Riyals) imposed on the purchase of the damaged units in the tax return. (Guidance Manual “Input Tax Deduction”)