The UAE Federal Tax Authority (FTA) issued a new VAT Guide in March 2023, which provides updated guidance on Input Tax Apportionment methods. The guide replaces the previous version and includes changes in line with the UAE Federal Decree-Law No. 8 of 2017 on VAT and its amendments. The updated guide aims to help taxable entities understand and implement the UAE VAT legislation on input tax apportionment and special methods. To further assist entities in this area, VAT consultants in Dubai are available to provide additional support.
The Input Tax Apportionment Guide offers valuable insights into the application of special methods for input tax apportionment. This summary provides an overview of the key updates introduced in the new guide. By reviewing this information, businesses can gain a better understanding of the latest regulations and requirements related to VAT in the UAE.
Expansion of Outputs-Based Special Apportionment Method to New Sectors
Previously limited to insurance companies, financial institutions, and local passenger transportation providers, the outputs-based special apportionment method has been expanded to include new sectors. According to the updated VAT Guide, educational institutions and establishments such as art galleries and cultural entities that engage in non-business activities are now eligible to use this method. To determine which sectors can use the outputs-based method, it may be useful to consult with tax agents in Dubai, UAE who can provide guidance and address any questions or concerns.
Expansion of Sectoral Special Apportionment Method to Include Real Estate Companies
The sectoral special apportionment method was previously reserved for large, complex companies with multiple divisions that operate independently from an operational and accounting standpoint, such as banks and insurance companies. However, according to the updated VAT Guide, the sectoral method can now be utilized by real estate companies that have distinct divisions for commercial and residential properties. This expanded scope allows more businesses to take advantage of this method for input tax apportionment.
Timelines for FTA Review of Input Tax Apportionment Requests
Under the updated VAT Guide, the Federal Tax Authority (FTA) has established specific timelines for reviewing input tax apportionment requests. For non-sectoral methods, the FTA will respond to initial requests within 40 business days. However, for sectoral methods, the FTA has extended the timeline to 80 business days. If additional information is needed, the FTA may request it, which could prolong the review process. In cases where an updated request is submitted for a special input tax apportionment method, the FTA will take an additional 40 or 80 business days to respond, depending on whether a non-sectoral or sectoral method is being used.
Requirements for Re-Application of Approved Special Apportionment Method
When a special apportionment method is approved by the FTA, it is valid for 2 to 4 years, depending on the chosen method. If the registrant wishes to continue using the method upon expiry, they must submit a new application to the FTA at least 40 business days before the current validity ends.
If the taxable person requests to continue using the previously approved special method before its expiry, they may continue using it until the end of the tax period, provided that the FTA issues a new decision on the request. However, any significant changes in the business must be highlighted in the new request to the FTA.
The new application must contain the same information and calculations as the original application for the 12 months preceding the new application. It should also include a comparative analysis of the recovery rates and sectors provided in the original application and the new apportionment calculation requested, with an explanation of any major fluctuations in the recovery rates.
Consult with Top VAT Consultants and FTA-Approved Tax Agents in Dubai, UAE
To ensure compliance with VAT regulations in the UAE, taxable entities can refer to the new FTA Guide when selecting a special method for input tax apportionment. However, it’s advisable to seek guidance from experienced VAT consultants in Dubai such as Elevate before making a decision. With over 10 years of experience in the industry, Elevate is one of the most reputable FTA-certified tax agencies in Dubai. Our team of FTA-approved tax agents can assist you with various VAT-related requirements, including VAT registration, return filing, record-keeping, financial reporting, VAT refunds, and VAT health check services.
Non-compliance with VAT regulations in the UAE can result in severe penalties, so it’s crucial to seek expert guidance from qualified tax agents in Dubai.
Contact Elevate today to ensure that your business stays compliant with VAT regulations and avoids potential penalties.
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