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Cost Components and the VAT Deduction

Kevin McCormick Alexander Barker & Co examines the EC law on the right to deduct input VAT and the developing doctrine of cost components
A trader wishing to claim a deduction for VAT incurred on goods and services must meet the conditions for the right to deduct. His inputs must be used in making taxable supplies and he must be able to demonstrate a direct and immediate link between the input and one or more taxable outputs. Also he must be able to show that the inputs are cost components of the taxable outputs. This article focuses on those main conditions for relief but there are others. For example the trader must be a taxable person and he must hold a tax invoice.

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