Can UAE businesses recover VAT on business expenses?
Input tax may include VAT paid on imports, domestic purchases and any VAT self-assessed by the businesses
In most countries where value-added tax (VAT) has been implemented, tax paid on most business expenses can be offset (or recovered) as input tax, but some expenditures do not qualify for tax recovery.
In the UAE too, some VAT outgo from businesses can be recovered. All VAT taxpayers must distinguish between recoverable and irrecoverable input tax to offset, claim and pay the right amount of tax in their accounts.
Input taxes are value added taxes due from or paid by a VAT-registered person in the course of trade or business on importation of goods, or local purchase of goods, properties, or services from a VAT-registered person.
The UAE’s VAT law has provisions for conditions under which businesses can recover VAT paid on inputs. The UAE law states that the input tax that is recoverable by a taxable person for any tax period is the total of input tax paid for goods and services which are used or intended to be used for making any taxable supplies.
Input tax may include VAT paid on imports, domestic purchases and any VAT self-assessed by the businesses such as VAT paid on the purchase of digital services. Executive regulations on the UAE VAT law specifies supplies on which VAT can’t be recovered such as entertainment services to anyone not employed by the person, including customers, potential customers, officials, or shareholder or other owners or investors.
Purchase of a motor vehicle, rented or leased for use in the business and is available for personal use and purchase of goods or services used by employees for no charge to them and for their personal benefit.