Can I recover VAT on legal fees?

Article 58 - Calculating the Input Tax that may be Recovered The Executive Regulation of this Decree-Law shall specify the method in which the Input Tax that may be recovered is calculated, if Input Tax is paid for Goods or Services during a specific Tax Period to make supplies that allow recovery under Article 54 and others that do not allow recovery or for activities conducted that are not in the course of doing the Business.

Article 46 - Supply Exempt from Tax19 The following shall be exempt from Tax: 1. Supply of financial Services that are specified in the Executive Regulation of this Decree-Law. 2. Supply of residential buildings through sale or lease, other than that which is zerorated according to Clauses 9 and 11 of Article 45 of this Decree-Law. 3. Supply of bare land. 4. Supply of local passenger transport. The Executive Regulation of this Decree-Law shall specify the conditions and controls for exempting the supplies mentioned in the preceding Clauses of this Article. Chapter Three – Single and Mixed Supplies

recovery depending on whether the supply is wholly taxable or wholly exempt or does not relate to the making of taxable supplies. This is referred to as direct attribution. For example, a non-designated charity may incur • legal fees in respect of setting up a new facility from which to provide free services to its beneficiaries. The input tax would be non-recoverable as it relates to free services (‘non-taxable’ activities). • VAT on goods that it purchases to sell on, in order to raise charitable funds. The VAT is recoverable since VAT will be due on the sales of the goods (taxable activities). • legal fees associated with the sale of bare land, where the related VAT cannot be recovered, as it relates to the making of exempt supplies. (The supply of bare land is exempt from VAT)11 • annual audit fees which relates to all the activities of the charity and therefore only a portion of the VAT may be recovered – refer to step 2 below. Any input tax which cannot be wholly attributed in this manner must be apportioned using an approved apportionment method in order to establish to what extent input tax may be recovered. A charity must use the standard input tax apportionment method to apportion input tax between exempt use and taxable use (see step 2 below), unless and until the charity submits a request for a special apportionment method and the FTA approved the method in writing. Refer to the Input Tax Apportionment: Special Methods VAT Guide (VATGIT1) for more information. 3.2.2 Step 2: Allocation of the residual input tax via the standard method The charity is required to distinguish between taxable, exempt and non-taxable use during each tax period. All input tax that cannot be wholly attributed under step 1 (‘residual input tax’ or R) must be apportioned as follows: 1. Determine the recovery ratio as a percentage: Input tax incurred in the tax period w hich is w holly attributable to the making of taxable supplies (T) T + Input tax incurred in the tax period w hich is w holly attributable to the making of non-taxable supplies 2. The resulting figure is expressed as a percentage and rounded to the nearest whole number. Apply the recovery ratio percentage to the residual input tax: Residual x Recovery Ratio % = Proportion of residual attributable to supplies for w hich input tax is recoverable (R2) 3. Treat the proportion of the residual which is attributable to taxable supplies as recoverable (and include in the tax return for the tax period in which the calculation was undertaken). 4. The total recoverable input tax = T + R2. 11 Article 46(3) of the Decree-Law. 11 VAT Guide | Charities | VATGCH1

Article 56 – Adjustment of Input Tax Post-Recovery 1. If Input Tax has been recovered because it was attributed to supplies as specified in Clause 1 of Article 54 of the Decree-Law but, before the consumption of the Goods or Services upon which that Input Tax was incurred the Input Tax became not so attributable, then the Taxable Person shall be required to repay that Input Tax. 2. If Input Tax has not been recovered because it was not attributed to supplies specified in Clause 1 of Article 54 of the Decree-Law but, before the consumption of the Goods or Services upon which that Input Tax was incurred, the Input Tax became attributable to supplies as specified in Clause 1 of Article 54 of the DecreeLaw, then the Taxable Person shall be able to recover Input Tax attributable to the use of the Goods or Services for making such supplies. 40 Clause added as per Cabinet Decision No. 149 of 2026 as follows (shall come into effect from the first Tax year commencing after 1 October 2027): For the purposes of paragraph (d) of Clause 6 of this Article, Government Entities and Charities shall calculate the recoverable Input Tax as follows: a. Government Entities and Charities shall calculate the percentage of the recoverable Input Tax pursuant to Clause 1 of Article 54, and Article 57 of the Decree-Law, to the total recoverable Input Tax and non-recoverable Input Tax for the Tax Period. b. The percentage calculated under paragraph (a) of this Clause shall be rounded to the nearest whole number. c. The percentage calculated under paragraph (b) of this Clause shall be multiplied by the amount of Input Tax referred to in paragraph (d) of Clause 6 of this Article to establish the recoverable portion of that Input Tax. Cabinet Decision No. 52 of 2017 and its amendments – As published by the Ministry of Finance 47 3. If Input Tax has been treated as subject to apportionment to calculate the Input Tax that could be recovered, but before the consumption of the Goods or Services upon which that Input Tax was incurred, the use of that Input Tax changes, then it shall be adjusted as follows: a. If it becomes attributable to supplies as specified in Clause 1 of Article 54 of the Decree-Law then the Taxable Person shall be able to recover Input Tax not previously recovered to the extent that it is attributable to the use of the Goods or Services for making such supplies. b. If it ceases to be attributable to any supplies specified in Clause 1 of Article 54 of the Decree-Law then the Taxable Person shall be required to repay that Input Tax. 4. The adjustments for change in use of Goods or Services under this Article shall be made only if all of the following conditions are met: a. The change in use occurred within five years of the Date of Supply of the relevant Goods and Services. b. The Taxable Person is not required to adjust the same Input Tax under mechanisms provided in Articles 55 and 57 of this Decision in which case those mechanisms will apply. Title Twelve – Capital Asset Scheme