"MASTERING THE COMPLEXITY OF CHARGING VALUE ADDED TAX [ VAT ] ON PARTY AND PARTY BILL OF COSTS"
The provision of legal services for a consideration is a " taxable supply" for which a provider if is a "Taxable Person" is liable to charge and account for Value Added Tax [ VAT] under The Value Added Tax Act Cap 42:02, Laws of Malawi. The VAT treatment on "Party and Party Bill of Costs" in litigation has been a cause of confusion to Practitioners and Taxing Masters [ and in some cases Judges] alike. More often than not, Legal Practitioners have charged VAT on Party and Party Bill of Costs [ and some of them failed to account for VAT], and the Taxing Masters have in almost all cases, blessed the charging of VAT on the taxed Party and Party Bill of Costs.
The legitimate question which has caused a confusion is whether VAT is claimed as "of course" in all the items in the Bill of Costs, and in every Party and Party and Party Bill of Costs? There is a gross misunderstanding and ignorance on the legal principles governing the application of Value Added Tax Cap 42:02 to Party and Party Bill of Costs in particular, and Legal Practitioner and his/her own client Bill of Costs on the other hand.
Parties to the litigation have been forced to pay VAT on Party and Party Bill of Costs without strict compliance with Value Added Tax Act. A number of questions arise when a party who is entitled to an input tax credit on legal fees is entitled to recover some or all of those fees under a judgment or negotiated settlement. These include the issue whether professional legal costs or outlays recoverable by the party who is entitled to the input tax credit should be reduced by the amount of the input tax credit, in recognition of the fundamental principle that the primary purpose of an award of costs in Civil Cases is to indemnify the successful party, not to permit that party to make a profit. Unlike the position which applies if a party has obtained an income tax deduction for expenditure on legal fees and subsequently recovers part or all of those fees under a court order or settlement, there is no reimbursement mechanism to require an adjustment in respect of the input credit.
At what point does the compliance with the scheme of Value Added Tax(Electronic Fiscal Devices) Regulations come into play when VAT is charged on Party and Party Bill of Costs? Is VAT awarded as part of an indemnity of costs incurred by the winning party? What is the scope of " taxable person" and "taxable supply" for the purposes of Party and Party Bill of Costs? Is "Party and Party Bill of Costs" a " Taxable Supply"? Can a Commissioner General appoint a Legal Practitioner or a Judicial Officer to be a " VAT Withholding agent for the purposes of " Party and Party Bill of Costs" award?
PEARSON TAX CHAMBERS shall conduct a training in a Tax Training on Value Added Tax on 18th June 2019 at Blantyre Sports Club, for a whole day where the Value Added Tax shall be comprehensively discussed including the VAT treatment on PARTY AND PARTY BILL OF COSTS shall be discussed as well.
TRAINING FEES: MK100,000.00 [ each participant shall also be give A handbook On Fundamental Tax
Legislation In Malawi for free]
TIME : 8:00am to 4: 00 pm
For bookings call on: +265(0) 212721946 / +265(0)992721946
Email: pearsontaxchambers@gmail.com
wamemdala@gmail.com
Wame M. Pearson
Chartered Tax Adviser - CTA [ Cand.] Uganda
ADIT- Affiliate (CIOT) UK,
Rethinking International Tax Law, Leiden University [ Netherlands]
P.G. Dip. Taxation & Revenue Administration, Uganda
P.G. Dip Legal Practice [ Bar Course], Uganda
Cert. Mediation, [ Commercial Court- Uganda]
LLB (Hons), Uganda
