UAE VAT Recovery Conditions

UAE Input VAT Tax Recovery Conditions

UAE VAT Implementation is right around the corner so we’re taking a look at another crucial thing for any business operating under the VAT regime to plan for – Input VAT Recovery.

Input VAT Tax is VAT levied on all taxable inputs of capital goods, raw materials, spare parts, services etc., which a business consumes or uses in its business.

Input VAT recovery conditions:

  1. Recipient must be a taxable person and must be registered for VAT
  2. VAT on the purchase must have been correctly charged by the supplier
  3. The goods or services have been acquired for an eligible purpose
  4. Recipient must receive and retain a tax invoice evidencing the transaction
  5. The amount of VAT which the recipient seeks to recover must have been paid
  6. Certain incurred VAT is specifically blocked from being recoverable as input tax regardless of whether the above conditions have been met.

Personal expenses incurred by the Directors but paid by the company would be non-reclaimable. VAT would also not be reclaimable on Client Entertainment expenses and Motor Vehicle expenses, when the Vehicle is available for personal use.

Employee Entertainment expenses are non-reclaimable, except in cases where it is:

  • Legal obligation to provide such goods or services under any applicable labor law
  • Contractual obligation or are provided as a matter of policy, and can be proven to be normal business practice.