How to Recover VAT on Business Expenses in UAE
Oct 27, 2020

How to Recover VAT on Business Expenses in UAE: VAT applies to business n the UAE provided that certain conditions are met. All business in the UAE will need to record their financial transaction in order to ensure that their financial records are accurate and up to date. Also, they have required keeping into consideration the stuff where VAT is applied and where not. For the ordinary expenses of the business, VAT is not be used as they don’t come under the category of VAT payments. This is owing to the fact that the recovery of VAT is blocked on some categories which include that of entertainment, transportation and employee expenses.

The said can be expounded with a simple example: Imagine that a company in Dubai procured 10 CCTV cameras where each worth of Dhs1, 0000. For the said business, a VAT of five per cent worth Dhs500 was paid. At the same month, the same company has disposed 20 CCTV cameras to a customer each worth Dhs2, 000; then VAT complied will be worth Dhs2,000.

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Accordingly, the output tax that payable by the business as acquired from the customer was worth Dhs2,000 and input recovered by the business was Dhs 500. Then the payable tax will be output tax payable minus the input tax recoverable.

And, based on the example as mentioned earlier, the company has to pay only Dhs1,500 as Dhs500 (input tax) to the local authority as the recovered one.

The following are the exact order that business has to persuade

The supplies have to be used in making taxable supplies: Here, the supplies on which VAT is accountable is paid which are called taxable supplies (input VAT recovery would only be allowed for input that is made in taxable supplies with the let-off supplies.

A tax invoice was given to the recipient and stored: The recipient that is avowing recovery for input tax on business supplies has to make sure that a tax invoice that involving the business supplies have been received and kept. The tax invoices are to exhibited especially of supply made.

Recipient has settled consideration for supply : The recipient that is avowing recovery for input has to pay or plan on making payment for review for supply in six months following the payment of supply’s agreed date.

Businesses in the UAE are still overlooking the potential of VAT expenses that they can recover, most especially the expenses that are made for the business. In the UAE, there are many businesses that leave their VAT refunds unclaimed every year. This is money that’s rightfully theirs if only it were not from the fact that they have no clue about VAT refunds in UAE or they think the process is too much of a hassle.

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The VAT recovery in the UAE may seem difficult for some business. For those hiring the assistance can be a good option. They have a detailed understanding of the said procedures. This makes them a very potential choice for gaining knowledge and then implementing it on the functions of the business.

Items that can’t be recovered from VAT are,

Especially, VAT that is charged at zero per cent can’t be recovering. Items treated as zero-rated in UAE are:

  • Export of products and services that are outside GCC Supplies of specific transportation services via sea, land, and air Eg. Ships and aircrafts
  • International transportation including related supplies
  • Certain investment grade metals such as silver and gold of ninety-nine per cent purity
  • Supply of certain medical and health care services, as well as the supply of all relevant products and services
  • Supply of certain learning and educational services, as well as the supply of all relevant products and services
  • Newly constructed properties for residential use

Whether businesses also recover tax from absolved supplies?

VAT is only paid for taxable supplies. Absolved supplies are not acceptable for VAT payment. Here there will be nothing for a business to recover. The excused supplies in UAE include:

  • Local passenger transport
  • Bare land
  • Residential building other than residential properties that are not considered as zero-rated
  • Financial services including financial services that are not performed for explicit fees, rebate, commission discount or a similar kind of consideration
  • Life insurance and life insurance reinsurance

The said can be tentative according to consideration of the local authority, ie. UAE Federal Tax Authority. It is always recommended that assistance in the form of a tax expert may be taken to handle VAT related details in UAE.

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