TThe VAT law in the UAE allows businesses to recover VAT paid on certain expenses. Input VAT can be reclaimed for any tax period if the total input tax paid on goods and services is used for making taxable supplies. This recovery process can help businesses reduce costs and maintain proper cash flow.
Also Read: VAT Registration For Abu Dhabi
Some of the conditions to claim VAT incurred on expenses are the following:
For example, if a retail shopkeeper buys goods from a wholesaler, the shopkeeper can take the input tax credit. However, the end user buying from the retail store cannot claim the input tax credit.
2. VAT should have been charged correctly.
If the VAT amount charged is incorrect or contains errors, the input VAT cannot be claimed. It’s essential that businesses ensure the correct VAT rate is applied and that no mistakes are made on invoices.
3. Proper records showing VAT paid must be maintained.
Businesses must keep proper VAT invoice records. These invoices serve as proof that VAT was paid on purchased goods, which is essential to claim the input VAT credit.
4. The goods and services acquired must be used or intended to be used for making taxable supplies.
Input VAT can only be recovered if the purchased goods or services are used for business purposes—specifically for producing taxable supplies. Businesses need to ensure they can identify which supplies are eligible for VAT recovery and meet all necessary conditions.
Any simple or non- extravagant lunch offer to employees for business meeting or having food or soft drinks delivered to the office.
or any food consumed during the course of a meeting will be allowed for input VAT recovery.
The expense comes under entertainment expenses and VAT law in UAE allowed the taxpayers to recover input VAT for such as long they are provided in the normal course of meeting.
VAT can be claimed If a taxable person incur any petrol expenses for delivering goods to a customer.
In an employment contract it may be promised that conveyance to and from the office for late night shifts can be recovered fully.
If so then this is contractual obligation or documented policy of the employer to provide those conveyance to employees .Such allowance which are contractual and provided in an employment contract can be fully recovered.
A company can also incur visa cost for the employees and pay 5% VAT on the visa processing. The employer can recover the VAT on such expenses.
Businesses in Dubai provide health insurance for their employees and pay 5% VAT on the cost of insurance.
The VAT paid on medical insurance is to be fully recovered since it is a legal obligation of the employer under UAE law.
Business engaged in the supply of taxable goods pay VAT on fees for periodically acquiring a legal consultation service from a law firm.
Though legal services are not directly related to supply of goods, legal services are acquired for business operations which means VAT can be recovered.
Any firm engaged in supply of taxable services, purchases new offices desks for their employees and to recover VAT incurred on purchase of the desks. This applies to similar expenditure for running a business day to day operation.
Input VAT can be recovered depending on certain circumstances as per VAT law of UAE. It is important that businesses distinguish between irrecoverable and recoverable input tax to claim and pay the correct amount of tax in their accounts. If you are confused about input VAT recovery in Dubai, seek guidance from VAT experts in UAE.
We understand every client’s situation and have the flexibility to tailor our services to a particular client’s requirements. Call us for further discussion on VAT recovery and we would be clad to assist you.