Input tax, i.e. VAT paid on the purchase of goods and services is claimable in the tax return by set off against the output VAT collected on sales invoices.
In the normal course, input tax should be recovered in the first tax period in which the following two conditions are satisfied:
Where the invoice has not already been settled within the tax period, it is pertinent to consider whether the taxable person has already decided to settle the invoice.
In this regard, merely receiving an invoice is not considered evidence of intention to settle.
However, if the tax invoice has been duly processed through the normal verification and approvals process of the taxable person and has been recorded in their accounting system, this is likely to be seen as a decision or intention to settle the invoice in due course.
It is important, however, to note that where an invoice has been received by the taxpayer, but has not been verified through the relevant processes to determine its validity and suitability for payment, it may not be possible to argue that the taxpayer has formed the intention to settle the invoice.
In such a case, the taxpayer should consider whether the input tax claim should be deferred to a later tax period.
In the case where a taxable person has received a tax invoice but has not yet decided regarding the settlement of the invoice, the Federal Tax Authority (“FTA”) may argue that the two conditions noted above – receipt of the invoice and the settlement of the invoice or the decision to settle – have not been satisfied.
In this case, therefore, it would not be appropriate to claim the input tax on such an invoice.
In such cases, therefore, the input tax claim invoice should be made in such later tax period when the decision to settle has been taken.
Article 55 (2) of the Federal Decree-Law No. (8) of 2017 on Value Added Tax specifically provides that where input VAT on a tax invoice has not been claimed during a tax period notwithstanding that the taxable person was entitled to make such a claim, the taxable person may claim the tax in the subsequent period.
Situations may arise where input tax has not been claimed in the tax period when the taxable person was entitled to claim nor in the subsequent period, as provided in Article 55 (2).
In such circumstances, the FTA has clarified that the unclaimed input VAT may be claimed through a Voluntary Disclosure.
A voluntary disclosure is a process where the taxpayer notifies the FTA of an error or omission in a VAT return.
A voluntary disclosure for claiming input VAT would be made by amending the input tax previously reported in the VAT return of one of the two tax periods during which the taxpayer could have claimed the input VAT.
Voluntary disclosures is normally required to be made within 20 business days of the taxpayer becoming aware of the error or omission.
However, the FTA may accept late voluntary disclosures if the taxpayer is able to justify the delay by presenting an acceptable reason for the delay.
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A taxpayer that is newly registered for VAT can claim back VAT paid on goods and services purchased prior to its VAT registration, provided that the goods and services for which input VAT is being claimed were used to make supplies that would ordinarily give the right to input tax recovery.
However, input tax may not be recovered in the following cases:
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The information provided herein is for the general information of the user and is provided in good faith. We make no representation or provide warranty of any kind, express or implied, regarding the adequacy, suitability, validity, or completeness of the information. Our advice in regard to UAE corporate tax and value added tax is based on our understanding of the relevant laws and the regulations issued. We cannot be held responsible for new regulations and/or interpretation of existing regulations by the FTA that is not consistent with our advice. Under no circumstance shall we have any liability to any user of this information or to third parties for any loss or damage of any kind incurred as a result of the use or reliance of this information.
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