Time Frame for Recovering Input Tax Credit:

  • Input tax is recoverable in the tax period in which the following conditions are met:
    • Tax invoice is received; and
    • Payment is made or intention to make payment to vendor within 6 months of agreed date of payment is formed.
  • If input tax is not recovered in the above tax period – Recover input tax in immediate next tax period.
  • On failure to make payment within 6 months of agreed date of payment, input tax must be reduced in the VAT return of tax period post completion of 6 months. Such input tax can be recovered again once payment is made.
  • If input tax is not recovered in any of the above specified tax periods – Recovery to be made by submitting a Voluntary Disclosure with Federal Tax Authority (‘FTA’) for the respective tax periods. Filing of a voluntary disclosure triggers a fixed penalty of AED 3,000 (first instance)/ AED 5,000 (on repetition).
  • Voluntary disclosure is required to be filed tax period wise.
  • Perform cost benefit analysis before filing a Voluntary disclosure with FTA to recover the missed input tax.
  • It is advisable to document an internal process to substantiate – date of receipt of tax invoices and date of formation of intention to make payment of such invoices.
    • Need assistance with VAT assessment, filing, compliance or consultation in the UAE? A dedicated and specialised tax team at PKF UAE can assist you. www.pkfuae.com