FTA Update – VAT Guide issued by FTA for clarity of Apportionment

FTA has issued ?VAT Guide? for giving conceptual clarity and calculating the Input Tax Apportionment on VAT,

A taxable person incurs various expenses which are subject to VAT while doing its business. This VAT can be taken as a credit by a taxable person where acquired goods and services are used, or intended to be used, in making any of the following:

  1. Taxable supplies;
  2. Supplies that are made outside the UAE which would have been considered taxable had they been made in the UAE; and
  3. Supplies of financial services which would have been treated as exempt if made in the UAE, but which are provided to a person who is outside the UAE and are treated as taking place outside the UAE.

Input tax which is incurred in respect of goods or services which are used partly for making Taxable supplies and partly for making Non-taxable supplies (i.e. for which VAT is not recoverable) must be apportioned. The credit will be restricted to the proportion relating to supplies that allow for VAT recovery/taxable.

Here in this update, we present you the formulas and method of calculation of the eligible Input tax credit and non-eligible Input tax credit. Tax Advisers in Dubai need to be cautious while deciding which is recoverable and non- recoverable.

The calculation is important for taking the correct tax credit as wrong credit taken May open doors for the hefty penalties.

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Read More:

Types of Supplies under VAT Law

Claiming Input VAT on Entertainment Expenses UAE

Impact of VAT on Different Departments

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