Upon purchasing goods or services there will be a certain amount of VAT incurred on the purchase known as the Input Tax. This input tax can be recovered back on certain items if you are a registered taxable person.
The recovery of input tax will be allowed if the goods and services purchased are used for making any of the following:
- Taxable supplies
- Financial services, which are considered as exempt in UAE, but provided to someone outside the UAE and is considered to be taken place outside UAE.
- Supplies which are made outside the UAE, that would have been treated as taxable in the UAE.
What are the two conditions for successful input tax recovery?
- If the tax invoice and other documents evidencing the supply or import is being received and maintained by the taxable person.
- If the amount of VAT has been paid in part or in whole. In case if the person plans to make the payment within 6 months of the due date it will be also considered for recovery.
It helps to know about the below expenses which are ineligible for input VAT recovery:
- Expenses on Entertainment
- Motor vehicles used for personal purposes
- Expenses related to employees
Even if the person is not a taxable person in UAE, under certain circumstances VAT can be recovered. The following categories are eligible for special refunds:
- Business visitors (There must be a minimum of AED 2,000 to be reclaimed for foreign businesses to submit VAT refunds).
- Tourist visitors
- Construction of residences by the UAE citizens
- Diplomatic bodies, foreign governments, missions and some international organizations and
- Any other persons or classes of persons listed under the suggestion of the minister in a Cabinet Decision.
If a taxable person couldn’t recover input tax in the tax period in which the conditions were met, the person can recover the amount in the following tax period.
There will be a 12 calendar month period for each refund and thus the first application can be made only after the end of 2018.
If you have any doubt about VAT Recovery call us on 00971-4-331-2332