What is Input Tax in UAE and how to recover it?

January 18, 2022Dated:  | |

What is an input tax?

An input tax is the UAE VAT (Value Added Tax) incurred on the goods and services that a person purchases in UAE.

What are the conditions for recovering the input tax?

According to VAT in the UAE, a registered taxable person can recover this amount given that the acquired goods are services are used or are intended to be used in making:

  • taxable supplies
  • supplies made outside the UAE which would have been taxable if made inside the UAE
  • supplies of financial services provided to a person outside the UAE (treated as taking place outside the UAE) which would have been treated as exempt if made inside the UAE.

Is TAX invoice important for recovering input tax?

A tax invoice must be provided as evidence of purchase to claim for the input tax on the purchased goods or services.

What expenses are input tax recovery blocked for?

Input tax on certain expenses incurred by a person is specifically blocked from being recoverable. Such expenses are:
· entertainment expenses that are incurred in respect of the provision of entertainment to anyone not employed by the business (accommodation, food, drink, etc.)
· motor vehicles used for personal purposes
· employee-related expenses unless necessary to perform the role or specified by the authority.

What are the provisions for non-taxable persons in the UAE?

In keeping with other global VAT regimes, the UAE will allow certain parties who have incurred VAT in the UAE to recover this VAT, even if they are not taxable persons in the UAE such as:
· business visitors
· tourist visitors
· foreign governments, diplomatic bodies and missions, and some other international organizations
· any other persons or classes of persons listed in a Cabinet Decision issued at the suggestion of the Minister.

Starting abusiness in Dubai requires careful consideration of the VAT rules and regulations, and the assistance of an experienced professional is advised. For the past 17 years, Flying Colour Tax Consultants and Flying Colour Group have been helping clients with all matters related to VAT in the UAE.

Our qualified tax consultants in Dubai can provide you with all details regarding VAT in the UAE and assist you in starting your dream venture in Dubai. Please feel free to mail your queries at info@flyingcolour.com or contact us at +971 4 4542366.

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