As the deductible input tax amount is directly linked to the amount of output tax payable, the customer cannot continue to deduct input tax for supplies received if the supply’s value is not fully paid. Specifically, the Executive Regulations included the following: “If a taxable person deducts input tax for a supply received and has not fully paid after a period of twelve months from the date of supply, the input tax deduction must be reduced by the amount of tax calculated on the remaining unpaid consideration on that date.”
This includes cases where the consideration for the supplier has not yet become due (for example, if an additional grace period is granted for payment). When the customer pays for the supply, they can then deduct the input tax in the period of payment.
In other cases, when the taxable person does not receive full or partial consideration related to a taxable supply, the taxable person, as the supplier, under certain conditions, is entitled to reduce the output tax for this supply. This is known as bad debt relief.
The adjustment of deductible input tax by the customer is not linked to the supplier’s entitlement to bad debt relief.