On 30 January 2020, the Federal Tax Authority (FTA) published clarification VATP017, "Time-frame for recovering Input Tax Issue" (the clarification).
In accordance with the combined provisions of article 55(1) of the Federal Decree-Law No. 8 of 2017 on Value Added Tax and article 54 (2) of the Executive Regulations (Cabinet Decision No. (52) of 2017 on the Executive Regulation of the Federal Decree-Law No. 8 of 2017 on Value Added Tax), input tax must be recovered in the first taxable period in which the following conditions are satisfied:
- the taxable person receives the tax invoice; and
- the taxable person has the intention to make the supply payment before the expiration of a period of 6 months after the agreed date of payment.
The FTA clarified that the above conditions will only be met when the taxable person completes the internal approval process and forms the intention to make the payment within the prescribed period. If an invoice is received during a taxable period and the intention to make the payment is formed in a later taxable period, the input tax can only be recovered in that later taxable period.
The clarification further provides that if the input tax is not recovered in the first two taxable periods, a taxable person is required to submit a voluntary disclosure. The voluntary disclosure should amend the input tax reported in the VAT return of one of the two taxable periods.