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Time Frame for Recovering Input Tax

22/10/2021

The FTA has published a clarification to clarify the time frame within which a taxable person must recover input tax. In this Clarification, the FTA clarifies its stance on the interpretation of Article 55 of the VAT Law, as well as the time restriction for recovering input tax. This clarification also examines the options accessible to taxable people if input tax is not recovered within the specified time frame.

Input VAT Recovery Is Subject To The Following Conditions:

  • > The following conditions must be met for input tax to be recovered in the first tax period: receipt for tax invoice; & the intention to do the payment of the consideration beforehand the expiration of 6 months after the settled date of payment is made.
  • > Both of these conditions must be met. That is, if a person does not decide to pay within six months of the agreed period, input VAT cannot be recovered solely on the ground of receiving a Tax Invoice from the vendor.
    • In light of these observations, a taxpayer must assert that, besides receiving a tax invoice, he has also met the criterion of developing an intention to make the payment within the stipulated period before recovering input tax.
  •  > Input VAT can be covered in a later tax period if the intention to pay is made in a tax period other than the one in which the Tax Invoice was received.

What happens if the input VAT is not collected within the time limit?

If the payer doesn't recover the input tax in the tax period in which both circumstances are met, the taxpayer can recover the input tax during the next tax period. If the taxpayer does not recover the input VAT in the following taxable period, he must make a voluntary disclosure.

What happens if the payment is not made within the specified time frame?

If the payer doesn't pay the payment within six months of the agreed date, following the expiration of the six-month term, the person should reduce the input tax in the VAT return for the tax period. Yet, once the payment is made, the taxable person will be able to reclaim the input tax.

Take Away

With the law and the preceding clarification in mind, the taxpayer must assess both conditions and ensure that the intention to pay is developed inside the specified timeframe. In fact, as an entrepreneur, it's very important and critical to deal with various queries and issues related to VAT & to comprehend the time frame for recovering input tax UAE. Hence, make sure to hire an experienced and reliable consultant for your business needs. The time frame for recovering input tax will depend on the type of claim you are making. You can consult expert VAT consultants in UAE to learn more about the time frame for recovering input. Here comes the role of expert VAT consultants in the UAE like ARC Associates.

We have expert VAT professionals who play an important role in the client’s tax matters. He or she helps the clients with VAT registration and other matters related to it. As a result, he is responsible for all the procedures of online applications with the tax authority. We can provide expert insight on how to recover input tax in UAE by doing it through rate correction, input tax credit, or adjustment methods. If you'd like to learn more about it, do drop an email at arcadmin@arcauditing.ae. We provide efficient and reliable support services with high customer satisfaction to UAE businesses by taking help from professional experts who are well-versed in this field.