Input tax, VAT paid by a business for the purchase of supplies and services. VAT in UAE allows all registered businesses in the country to recover tax. That paid for producing goods and services that sold to clients and customers. Input tax that is eligible for a business to recover plays a significant role to a company’s cash flow, as well as operating expenses.
Here is an example on how input VAT recovery works. A company in Dubai purchases 10 CCTV cameras at Dhs1,000 for every set. For the purchase, the business pays VAT at the rate of five percent which is Dhs500. During the same month, the company has sold 20 CCTV cameras to a customer for Dhs2,000 each. VAT that collected at five percent amounts to Dhs2,000.
In this scenario, the output tax that payable by the business as it was collect from the customer is Dhs2,000. The input tax that may be recovered by the business is Dhs500. Tax payable is equal to the output tax payable minus the input tax recoverable.
Hence, the company will pay to the local tax authority only Dhs1,500 as Dhs500 (input tax) recovered.
A registered business in UAE may recover VAT. That is paid on all purchases of goods and services which are utilize for business purposes (subject to conditions set by the Federal Tax Authority or FTA).
The provision of input tax recovery in UAE is important for businesses in the country that are registered for VAT. A business, therefore, need to make sure that it is able to identify its supplies correctly on which VAT from business expenses (input tax) may recovered. A business also has to make sure that it fulfills conditions set of claiming input VAT and to claim input VAT on time. All these will ensure that there is optimum cash flow for the business and that it has working capital. Work may made easier with the help of regulated tax agents in UAE. They will handle the accounting of the VAT transactions of business and process the VAT recovery for you.
At Farahat & Co, we help businesses with their VAT recovery claims and all matters related to taxation in UAE. Call us today as our team of vat consultants in UAE are dedicated in making sure you are fully compliant to taxation laws in the country while leaving you enough time in focusing on running your business!
VAT that are charge at zero percent can't be recover. Items considered as zero-rated in UAE include:
VAT is only paid for taxable supplies. As exempt supplies do not entail the payment of VAT, there is nothing for a business to recover. Exempt supplies in UAE include:
This list is subject to change with the discretion of the local tax authority. Which is the UAE Federal Tax Authority. We advise tax registered businesses in UAE to always consult with tax experts regarding concerns and issues pertaining to VAT in UAE.