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 paid on goods and services used, or intended to be used, for making taxable supplies. However, the right to recover input tax is restricted in certain scenarios provided under the VAT Executive Regulation, regardless of whether the cost was incurred while making taxable supplies.
In this article, we will clarify the key points related to input VAT recovery on mobile phones, data packs, and airtime provided to employees, and how VAT registration Dubai can help you get things sorted easily.
As per Article 53(1)(c) of the Executive Regulation, input tax incurred on goods and services purchased for use by an employee for his or her personal benefit is not recoverable unless there is a legal or contractual obligation on the employer. This means that, under the current rules, an employer must acquire phones, airtime, and data packages strictly for business use or business purposes. The employer must also have strict policies to restrict their use for business purposes only.
In such cases, the right to use the phone, airtime, and data packages provided by the employer does not amount to a personal benefit for the employee. To understand this better and get a clearer picture in this respect, one should consult VAT registration UAE.
Need VAT Guidance?
Not sure what to do next with VAT?.
Ask our team first and get a clear answer for your business situation.
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 recover input tax on mobiles, airtime, and data packages only when they are used strictly for business purposes. This must be documented and actively enforced.
Taxpayers are not allowed to change their existing policies and apply the new guidance retroactively. This means that the value of airtime and data usage must be determined based on actual historical usage. The FTA has clearly stated that it will not accept backdated policies.
Along with a documented business use policy, the employer must monitor the usage by employees to ensure that mobile phones, data packages, and airtime are not being used for personal purposes. VAT registration UAE can help you recover 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
Where costs are incurred to make taxable supplies, businesses are allowed to recover input tax on mobile phones, airtime, and data packages provided to employees for business purposes. However, this input tax recovery is allowed only when certain conditions are met by the company or employer. These are discussed below in more detail:
The employer must have its business registered for VAT in the UAE.
The business must ensure that the mobile phone, airtime, and data packs have been purchased in its name. The invoices and contracts obtained from the service provider must reflect the business details. Failure to do so may result in denial of VAT recovery.
The business must have a documented policy prohibiting the personal use of mobile phones, airtime, and data packages by employees.
The documented policy mentioned above must clearly state that the use of mobile phones, airtime, and data packages is restricted to business purposes only.
The business must warn employees against using mobile phones, airtime, and data packages for personal work.
The business must also monitor usage on a regular basis and retain justification in case any variation occurs.
The business must keep a record of valid tax invoices relating to the use of mobile phones, airtime, and data packages.
Need VAT Guidance?
Not sure what to do next with VAT?.
Ask our team first and get a clear answer for your business situation.
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 sets out the main conditions for recovering input tax on mobile phones, airtime, and data packages provided by an employer to employees for business purposes. A business in the UAE is eligible for VAT recovery on input tax for mobile phones and data packages only if it meets the conditions mentioned above and has laid down a strict policy for the same.
If your business meets these conditions and complies with all the requirements mentioned in this article, the tax agents at VAT registration UAE can help you recover the input tax.
We have over 20 years of experience in accounting and bookkeeping services. Over the years, we have become a top-rated provider of VAT consultation in the UAE. Our wide range of services includes VAT registration, VAT filing, VAT record keeping, and appeals against VAT administrative penalties.
Contact us today, and we will help you get all your VAT compliance work done at a very affordable price.
