FTA’s Clarification For Recovering Input Tax

FTA Public Clarification

The UAE Federal Tax Authority (FTA) has issued a new public clarification. The public clarification is known as VATP017 on Article 55 of the Federal Decree-Law No. 8 of 2017 on Value Added Tax (“VAT Law”). This clarification elucidates the FTA’s stand on interpreting Article 55 of the VAT Law. It discusses the period within which they can recover the input tax.

It also discusses the resources available to taxable individuals. Further, it explains cases where the authorities do not receive the input tax during the prescribed time.

Accordingly, a taxable person may receive a tax invoice but may not intend to make the payment until the internal approval process for the invoice is completed. As per the FTA, a taxable person will fulfill the conditions of Article 55(1) VAT law only if he completes the internal approval process and intends to pay within the prescribed time.

What happens in cases where authorities receive a tax invoice during a tax period but do not receive input tax? In that case, authorities in the UAE can recover that tax in the following tax period. A taxable person must submit a voluntary disclosure. Submission when he fails to pay the input tax within the first two tax periods. This voluntary disclosure should amend the input tax reported in the VAT return of one of the two tax periods.

For instance, a taxable person fails to make the payment of consideration before the expiration of six months after the agreed payment date. In that case, the taxable person should reduce the input tax in the VAT (value-added tax) return of the tax period following the expiry of the six months. However, the taxable person can recover the input tax once he makes the payment.

Download FTA public clarification on the timeframe for recovering Input Tax

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