UAE VAT - FTA Guidance about special input tax apportionment methods

CA Rajiv HiraCA Rajiv Hira    20 November 2019
UAE VAT - FTA Guidance about special input tax apportionment methods

UAE Federal Tax Authority issued Guide on "Input Tax Apportionment: Special Methods - VAT Guide | VATGIT1"

There are three clean methods & one hybrid method recommended in the process.

Method Type

Who can adopt?

Outputs based method

The outputs based method is available for companies engaged in the following sectors:
(a) Insurance companies (Islamic and non-Islamic).
(b) Retail banks (Islamic and non-Islamic).
(c) Banks engaged in certain aspects of wholesale and/or investment banking (Islamic & non-Islamic).
(d) Providers of local passenger transportation services.

Transaction Count method

Transaction count method is available to banks (Islamic and non-Islamic) engaged in wholesale and investment trading activities, since costs incurred in the course of such activities are generally similar per trade regardless of the trade’s value.

Floorspace method

The floorspace method is available to businesses which deal with supplies (sales and rental) of commercial and residential properties, including real estate companies and other businesses which sell or rent out real estate on an ongoing basis, where expenses would be similar for floorspace regardless of whether used for making exempt or taxable supplies.

Sectoral method

Sectoral methods will be used by large, complex banks and insurance companies, which operate through different divisions – e.g. banks which have retail and investment banking divisions; or insurers where they write life and non-life contracts.

Division segregation can be done, using below methods:
(a) Headcount Method.
(b) Output Method

Once Division segregation is done, adopt any of the method based on division activity:
(a) Output based method.
(b) Transaction Count method.
(c) Floorspace method.

 

In Jan 2020, perform the loopback for 2019 input tax claimed, where you are having mixed input tax and initiate working / plan for 2020 input tax claim methodology.

 

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