The Federal Tax Authority of the UAE issued a public clarification with respect to article 55 of the Federal Decree-Law No. 8 of 2017 on VAT Law that prescribes the time-period within which input tax should be recovered by a taxable person. It also clarifies the alternatives available if the input tax is not recovered within the prescribed time-period.
Input tax can be recovered in the immediate first month after the payment of tax through tax returns. However, input tax can be recovered only when the following two conditions are satisfied:
Tax invoice must be issued whenever a taxable supply is made. As per FTA guidelines, Tax invoice is of 2 types:
- The taxable person posses’ valid taxes invoice.
- The payment of the same should be made within 6 months from the agreed date of payment.
For the avoidance of doubt, please note that where a tax invoice is received in one tax period and the intention to make the payment is formed in a later tax period, the input tax can only be recovered in such later tax period.
- If not claimed in first month, then it can be claimed in the immediate next month.
- If not claimed in first 2 months, then the taxable person needs to submit a voluntary disclosure.
- The voluntary disclosure should amend the input tax reported in the VAT return of one of the two tax periods.
However, if the taxable person fails to make the payment of consideration before the expiration of six months after the agreed date of payment, the taxable person should reduce the input tax in the VAT Return of the tax period following the expiry of the six-month period. However, once the payment is made, the taxable person will again be entitled to recover the input tax.