Guideline to VAT Recovery on Expenses in Dubai
You may be interested to know the various VAT recovery expenses for your tax planning. The thought of VAT payments itself pulldown the head. If you often get confused about the VAT treatment in business check it out here you will find something new on the VAT recovery expenses while tax planning. The best part of VAT is that most of these expenses are refundable, however, the VAT refund rules vary significantly from country to country and are very complex. Evidence is the most important aspect of the VAT-recovery purpose. VAT is an indirect tax on consumption and the VAT return filing on time safeguard your business providing legal assurance and advantages in the stage of tax payments, avoiding financial loss. Understanding the recoverable expenses and planning accordingly prevent errors and penalties.
VAT Recovery Procedures
Most companies that incur the VAT are entitled to apply for a refund. The procedures include:
1. A VAT recovery claim has to be filed with the federal tax authority.
2. While applying for VAT recovery original invoices must be submitted with the claim, including signed refund forms.
3. The input VAT credit could be recovered in the tax period monthly or quarterly in which the following two conditions are satisfied for the first time, or in the immediately following tax period. The two conditions are: The tax invoice is received, and an intention to make the payment for the supply before the expiration of six months after the agreed date of payment is formed.
4. Documents required are:
- Sales Invoices, Purchase Invoices
- Debit or Credit Notes
- Import and Export Records
- Accounting Books
- Zero-Rated/exempt Supplies and Purchases
- Records of goods issued free or private use
VAT Recovery At 5%
Some business expenses are recovered at 5% they are:
- Equipment Maintenance and Building Insurance
- Utility and postage couriers
- Computer software
- Office premise rents
- Marketing, printing and stationery, website services and internet advertising
Fully Recoverable Expenses
- Food and drinks: food and soft drinks consumed during the course of business meetings will be allowed for input VAT recovery.
- Petrol expenses: The VAT paid on petrol expenses for business use can be claimed fully. Apportionment of both personal and business purpose use is a complex task.
- Conveyance expenses to employees: In the employment period conveyance ‘To’ and ‘From’ the office will be given. Here, the VAT paid on conveyance expenses can be fully recovered.
- Expenses incurred on a visa to an employee: You will be allowed to recover the input VAT on Visa cost expenses.
- Medical insurance expenses: The health insurance coverage for the employees has 5% VAT on the cost of insurance. The VAT paid on medical insurance is fully allowed to be recovered fully.
- Audit Fees and Bank Charges: Such charges are fully recoverable under UAE VAT law.
- Legal consultation expenses: The business periodically receiving a legal consultation service from a law firm is subject to VAT recovery.
- Capital expenditure: A firm engaged in the supply of taxable services purchases is allowed to recover the VAT incurred on the purchase
Example: Condition under which VAT incurred on expenses cannot be claimed
- Customs duty paid at the time of import cannot be claimed for payment of VAT in UAE.
- Entertainment expenses: For instance, if a manager provides dining for the team, such expenses cannot be claimed.
Why choose CDA?
CDA offers Tax Consultancy Services and Tax Reclaim Services at a very reasonable charge. Having a huge number of clients, CDA is acclaimed as a leading platform that has been dealing with VAT services in UAE of start-ups and established businesses across the Emirates.
Also read, Why VAT Consultancy Services required for your business in UAE?
CDA also provides Accounting & Bookkeeping Services, Accounts Outsourcing Services, Internal Audit Services, and a lot of other services related to the business in the UAE.
So, you might have cleared the confusions on VAT recovery expenses in UAE, right?. If you need any kind of support or services related to VAT in UAE, feel free to contact CDA. Our vat consultants will be always there for your assistance