(1) Where a taxable person issues a tax invoice for the supply of taxable goods or services and the supply was not received by the taxable person, the taxable person may deduct input tax under section 48 for tax paid in respect of the taxable supply that is subsequently treated as a bad debt.

(2) Subject to subsection (5), the amount of the deduction allowed under subsection (1), is the amount of the tax paid in respect of the taxable supply which corresponds to the amount of the debt treated as a bad debt.

(3) The deduction under subsection (2) (a) becomes due on the date on which the bad debt was written off in the accounts of the taxable person; and (b) is available only if the taxable person satisfies the Commissioner-General that reasonable efforts have been made to recover the amounts due and payable.

(4) Where an amount in respect of which a deduction has been allowed in accordance with subsection (2) is at any time wholly or partly recovered by the taxable person, the taxable person is regarded as having charged tax in respect of a taxable supply made during the tax period in which the bad debt is wholly or partly recovered, with the amount of tax calculated according to the following formula:

Ax B/C where, (a) A is the amount allowed as a deduction under subsection (2); (b) B is the amount of the bad debt recovered; and (c) C is the amount of the bad debt previously written off.

(5) A deduction is allowed under subsection (2) only if

(a) the taxable supply was made to a person other than a taxable person; or

(b) the taxable supply was made to a taxable person and the person claiming the deduction under subsection (2) issued a tax credit note to the taxable purchaser listing the amount claimed under subsection (2).