VAT Expenses that can be Recovered by Businesses

A lot of businesses in the UAE still overlook the potential of VAT expenses that they can recover, most especially the expenses that are made for the business-like conference tickets and hotel stays among others. In the UAE, there are lots of businesses that leave their VAT refunds unclaimed each year. This is money that’s rightfully theirs if only it was not from the fact that they have no clue about VAT refunds in UAE or they think the process is too much of a hassle. 

Also Read: A Guide On VAT Reclaims In UAE

In this article, we’ve listed the expenses that you can recover if they are made for the business that is VAT-registered in UAE. Let’s start! 

  • Medical Insurance Expenses

Businesses in Dubai, in particular, offer health insurance coverage to all staff members and they are paying five percent VAT on insurance costs. VAT paid that is for medical insurance will be recovered by the business as anything that’s of a VAT-registered business’ legal obligation under applicable labor legislation is allowed by the country’s tax authority, the UAE Federal Tax Authority or FTA. 

  • Any Legal Consultation Expense

Let us say that a business engages in a taxable good or service’s supply and pays VAT every single time it gets a consultation service from a legal or law firm. Although legal services aren’t directly in relation to goods or services’ supply, VAT that is paid on a legal service may still be recovered by a registered business. 

The reason for this is because it’s not necessary for a business to link each purchase with outward supply in a business. There are purchases, like legal expenses for the business, which are consumed or acquired by a business in order to run operations or even use on a daily basis. If you are not sure if you are able to recover VAT from legal expenses of your business, we suggest you have a regulated tax agent to review the transactions. 

  • Capital Expenditure

VAT on capital expenditure that is incurred by a business in the service industry may be recovered. For example, a law firm that is engaged in a taxable service’s supply buys new office desks in order to provide staff members with their very own workstations. Since the office desks will be utilized by the firm in conducting taxable activities, it is allowed in recovering VAT which is incurred upon the purchase of the office desks. 

  • Food and Beverage for Customers or Clients

Simple, non-extravagant meals with customers or clients as part of being hospitable to them during meetings and having food and beverage delivered onto the office for consumption during meetings can be eligible for VAT recovery in UAE. Take note: taking a client out and treating him or her for lunch and entertaining the said client won’t be recoverable for VAT. 

By definition, the expense mentioned earlier is allowed as it’s part of a registered business’ entertainment expense. The UAE VAT legislation allows a VAT-registered business to recover any input VAT that is from an entertainment expense just as long as the expense has been provided in a course of a normal meeting. If it is otherwise, then it won’t be allowed and be completely restricted by the authorities. It is best for a business not to include lavish dinners and meals with clients on a VAT return as the authorities can question the expense and order a VAT audit. 

  • Petrol Expenses

Let us say that you are engaged with goods’ supply and you have incurred significant petrol expenses in order to deliver the goods that you are selling to consumers. VAT which was paid on the petrol expenses of the business will be recovered. But, if petrol was used for both business and personal purposes, then it can be very difficult in keeping track with regards to the amount of petrol used for business alone. 

Also Read: Steps To Succeed With VAT Return Filing In UAE
  • Conveyance Expenses for Staff Members

In staff members’ employment contracts, it’s promised that conveyance will be provided for shifts that are late at night. Here, VAT that is paid on a conveyance expense will be recoverable fully. 

This is because a contractual obligation or any documented policy of an employer in providing services or goods to staff members allows the employer in performing their role. It is also where it may be proven as a typical business practice in doing so within an employment term. 

  • Visa Expenses for Administration and Employees

A business that incurs visa processing costs for employees and was charged five percent VAT will be able to recover VAT paid. The business will be capable of recovering input VAT for such expenditure.  it is because the cost that is incurred in this transaction allows an employer to perform its duties and it’s a normal business practice. 

If you want to know more about VAT refunds in UAE, call us here in VAT Registration UAE.