January 10 2020

Special Methods Guide on input VAT apportionment – amended

Source: IBFD Tax Research Platform News

On 28 December 2018, the UAE Federal Tax Authority (FTA) issued an Input Tax Apportionment: Special Methods Guide (the updated guide) according to which it was clarified that the calculation of the "actual use" should be made in accordance with one of the special apportionment methods described in the updated guide.

The first version of the guide was published on December 2018 and provides for special methods to determine the recoverable part of the residual input VAT for the taxpayers who are not allowed to fully recover the Input VAT incurred on the goods and services supplied to them. These methods such as the outputs based method or transaction count method would be accepted in the case where the standard method provided by article 55 of the Cabinet Decision No. 52 of 2017 on the Executive Regulations of the Federal Decree Law No 8 of 2017 on Value Added Tax is not appropriate.

However, the application of the special methods requires prior approval from FTA following an application made by the taxpayer.

The updated guide provides for the same rules as its first version with the following amendments:

  • The taxpayers applying for methods of Input VAT Apportionment other than the standard method are required to submit their calculations to the FTA for a minimum period of 12 months preceding the application (previously the calculation was set for a 6-12 month period).
  • Appendix 2 amended (example on input tax apportionment): the FTA has added a disclaimer stating that the example may not be suitable for all taxpayers and needs to be adapted to the type of business.
  • Addition of an Appendix 3 on Common Errors: the FTA has provided a checklist that taxpayers need to go through before sending their application to the FTA.