Can the Input Tax on Rent for Employee Dormitories be Deducted from the Output Tax?
The National Taxation Bureau of Kaohsiung, Ministry of Finance clarified that VAT input tax on rent for employee dormitories can be deductible under the circumstances below.
1. The dormitories are accessible to all employees, not limited by job level.
2. The dormitories are used to centralize or unify employee management, which can be recognized as being used for the main business or subsidiary business.
Under the Value-Added and Non-Value-Added Business Tax Act (hereinafter referred to as the Business Tax Act) Article 19, Paragraph 1, Items 2 and 4., input tax cannot be deducted for items not used in the main business or for personal use by compensated employees. If the rent for employee accommodations meets the Ministry of Finance’s criteria, the input tax can be deducted against the output tax. However, the input tax related to payments for utilities such as water, electricity, and gas is considered personal use by compensated employees and cannot be deducted against the output tax.
Example:
For a monthly rent of NT$10,000, which is of employee dormitory, the deductible input tax is NT$1,000 for two months (NT$20,000 total rent x 5% tax).
For utilities cost NT$2,000 per month, the input tax is NT$100, which is non-deducible input tax.
