The recent public clarification issued by the Federal VAT Claim, VATP17, outlines the timeframe for reclaiming input VAT. Under this clarification, companies meeting the ministry’s criteria can seek input VAT recovery through the FTA. This guide provides insights into the allowable window for VAT-registered businesses in the UAE to claim input VAT.
Additionally, it sheds light on the penalties and consequences associated with late claims. In navigating these regulations, the expertise of VAT specialists in the UAE becomes invaluable. By leveraging their knowledge of the intricacies involved, businesses can optimize their input VAT recovery and minimize VAT expenses within the stipulated timeframes.
What is input VAT in UAE?
Input VAT, also known as input tax, is the amount paid by your business for the purchases it makes on its purchases for business operations. The term input tax has been given because it is VAT paid on input raw materials or the purchases made by the business to produce goods and services. Companies can claim this input VAT if they are eligible to do so from the FTA when filing their VAT returns.
Input VAT claim time limit in the UAE
As per the clarification that the Federal Tax Authority has published regarding the input tax, there is a prescribed time frame for recovering input tax in the UAE. This is when you must claim your input VAT in the UAE from the taxable person. Every taxable person is eligible to claim for input VAT recovery as per the rules by law no—8 of 2017.
As per the laws in the UAE, input tax paid on expenses can be claimed during the tax period in which the expense has occurred. It also has to be kept in mind that the expense should have been done for making taxable supply only. If the company fails to claim the input tax in the taxable period it was done, the same can be done in the subsequent tax period.
The latest public clarification on input tax claim rules states that the input tax can be recovered only when the following conditions are satisfied:
- The business has received the tax invoice.
- There has been an intention to pay the amount on the invoice within six months from the agreed payment date.
The intention to make the payment here is essential. In the case of manufacturing companies, the intention to make the payment happens only once the quality control has been done. The company intends to make the payment if the quality control approves. The taxable company, therefore, must ensure that the intention to pay condition has been satisfied before claiming an input tax recovery from the FTA. Even when the tax invoice has been received, the intention to pay must be formed in order to claim for input tax recovery.
What are the conditions when input tax is not claimed in the first tax period when the above conditions are satisfied?
- The taxable person may make a claim in the tax period that follows the first tax period in which both requirements were met.
- Should the taxable individual fail to claim input tax in the ensuing tax period, they may choose to utilize voluntary disclosure.
Conditions when input tax is not paid by the taxable person within six months of the due date of payment
- If this is the case, once the payment has been made, the taxable person can claim the input tax in the following taxable period.
- Additionally, in the tax period that follows the six-month term period’s expiration, the taxable person must deduct the input tax amount from the VAT return.
The VAT registered businesses shall fully adhere to the dates and deadlines for claiming their input VAT expenses from the FTA. By adhering to these suggestions, companies can optimize their input VAT recovery chances and maintain a compliant tax position. When inputting VAT claims, it is best to speak with a certified tax agent or counselor about any specific queries or complicated circumstances.
VAT registration in UAE can help the VAT registered businesses timely Input VAT Claims in the UAE
Seek assistance from UAE’s proficient VAT experts for timely VAT registration UAE and claiming of input VAT recoveries with the FTA. Reach out today, and we’ll gladly aid you in navigating the input VAT process, verifying recoverability, and ensuring compliance with FTA’s timelines. Engage VAT Registration UAE, a reputable Tax Consultant in UAE to secure your business’s input tax within UAE’s prescribed limits.
