Guide to Input VAT Recovery on Mobile Phones, Data Packs Provided to Employees in the UAE

What does the law on input VAT recovery on mobile phones, airtime and data packs in the UAE say?

As per the tax law, a taxable person is allowed to recover the input tax he has paid for the goods and services used or intended to be used for making taxable supplies. The right to recovery of input tax is restricted to the scenarios that are provided in the VAT executive regulation, irrespective of the fact whether the cost was incurred while making the taxable supplies. In this article, we will clarify all points related to Input VAT recovery on mobile phones, data packs, and airtime provided to the employees and how VAT registration Dubai can help you in getting things sorted easily.

As per article 53 (1), (c) of the executive regulation, the input tax incurred on the goods and services purchased for use by an employee for his or her benefit is prohibited unless there is any legal or contractual obligation on the employer. This means that as per the current rules, an employer has to acquire phones, airtime, and data packages strictly for use in business or for business purposes, and they must have stringent policies to restrict the use of the same for business purposes only. Here, the right to use the phone, airtime, and data packages provided by the employer do not amount to the personal benefits of the employee. For understanding it in a better way and to get a better picture in this respect, one must consult VAT registration UAE.

Conditions laid down for input VAT recovery on mobile phones, airtime, and data packs in the UAE

As per the laws and public clarifications, employers are entitled to recovery of input tax on mobiles, airtime and data packages only when they have been used strictly got business purposes. This must be documented and enforced actively. The taxpayers are not supposed to change their existing policies apply the new guidance retroactively at any cost. This means that the value of the airtime and data usage must be determined based on the actual usage in history. The FTA has clearly mentioned that it is not going to accept any of the back-dated policies. Along with the documented business use policy, the employer must monitor the usage done by the employee in order to ensure that the mobile phone, data package, and airtime is being used by them for personal use. VAT registration UAE can help you in recovering the input tax in a more efficient way.

Conditions to be met by businesses for input VAT recovery on mobile phones, airtime, and data packs in the UAE

In situations where costs are being incurred to make taxable supplies, businesses are allowed to recover the input tax on mobile phones, airtime, and data packages that are provided to the employees for business purposes. However, this input tax recovery is allowed only when certain conditions are met by the company or employer. They have been discussed below in more detail-

  1. The employer must have his business registered for VAT in the UAE.
  2. The business must ensure that the mobile phone, airtime, and data packs have been purchased in its name. The invoices and the contracts that are obtained from the service-providing company must reflect the details of the business on them. The absence of this may result in denial to get back the VAT amount paid.
  3. The business must also have set a documented policy prohibiting the use of mobile, airtime, and data packages for personal usage by the employees.
  4. The documented policy mentioned in the above point must also mention clearly that the use of mobile phones, airtime and data packages are restricted for business purposes only.
  5. The business must warn the employees from using the mobile, airtime, and data packages for personal work.
  6. The businesses are also supposed to monitor the usage on a regular basis and must retain a justification in case any variation occurs.
  7. The business must keep a record of a valid tax invoice in concerning to the usage of mobile phones, airtime, and data packages.

How VAT registration Dubai can help you in input VAT recovery on mobile phones, airtime, and data packs in the UAE?

The recent VAT public clarification says that top conditions to recover input tax on mobile phones, airtime, and data packages provided by an employer to his employees for business purposes or for business use. The business in the UAE is eligible for VAT recovery on input tax for mobile phones and data packages only if they meet the conditions mentioned above and have laid down a strict policy for the same. If your business meets the said condition and is compliant with all the conditions mentioned in this article, the tax agents at VAT registration UAE can help you in the recovery of the input tax. We have over 20 years of experience in accounting and bookkeeping services. Over the years we have become the top-rated provider of VAT consultation in the UAE. Our wide range of services includes VAT registration, VAT filing, VAT record keeping, and appeal against VAT administrative penalties. Contact us today, and we will help you in getting all your work done related to VAT compliance at a very affordable price.

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