UAE Tax Authority Releases Updated Guide on Input Tax Apportionment What You Need to Know
In March 2023, the UAE Federal Tax Authority (FTA) will replace the previous version of the VAT Guide on Input Tax Apportionment. In compliance with the UAE Federal Decree-Law No. 8 of 2017 on VAT and its most recent revisions, the new guide intends to give taxable organizations clarification and direction regarding input tax apportionment and special procedures for input tax apportionment. This article gives a summary of the main revisions made to the new VAT guidance on input tax apportionment and explains how Dubai VAT experts may help businesses adopt them.
One of the significant changes in the updated guide is the extension of the scope of the outputs-based special apportionment method to include educational institutions and establishments like art galleries, cultural entities, and similar establishments that conduct non-business activities.
Previously, this method was only available to insurance companies (Islamic and non-Islamic), financial institutions (Islamic and non-Islamic), and providers of local passenger transportation services. Businesses in these sectors can consult with tax agents in Dubai to determine if they can use the outputs-based method.
Moreover, the updated guide extends the scope of the sectoral special apportionment method to real estate companies with separate divisions for commercial and residential properties. This method is typically used by large and complex businesses with different divisions operating independently from an operational and accounting perspective. Previously, the sectoral method was limited to large, complex companies and establishments with different divisions, such as banks' retail, investment and real estate divisions, and insurance companies providing life and non-life insurance.
The updated guide also provides information on the FTA's review timelines for input tax apportionment requests. The authority will take up to 40 business days to respond to the initial input tax apportionment request for a non-sectoral method and 60 days for requests using a sectoral method. The FTA may request additional information if deemed necessary, and an additional 40 or 60 business days for a response to an updated request for a special input tax apportionment method.
If the FTA approves the use of a special input tax apportionment method, entities can use that method from the first tax period following the approval date. The validity of any special method approved by the FTA will be between 2 to 4 years, depending on the method chosen. To continue using the previously approved special method, the taxable person must submit a new application to the FTA at least 40 business days before the expiry of the most recently approved special method. Any significant changes in the business should be highlighted in the new request, and it should include the same type of information and calculations as the original application for 12 months preceding the new application.
In conclusion, taxable entities can use the updated FTA Guide while selecting a special method for input tax apportionment. However, it is advisable to consult with the best VAT consultants in Dubai, such as AB Accounting and Management, to ensure compliance with VAT regulations and avoid hefty penalties. With over two decades of experience in the industry, their FTA-approved tax agents in Dubai can assist businesses with VAT registration, return filing, record-keeping, financial reporting, VAT refunds, and VAT health check services. Ensure VAT compliance and consult with the best tax agents in Dubai today.