Input Tax

Company got VAT registration from 01/11/2019 on quaterly basis. Input VAT charged by the contractor for construction of residential and commercial unit is AED 1.5 million for the period 01/01/2018 to 31/10/2019. The above residential and commercial units is completed on 31st July 2019 and 25% of such units are leased for the period of one year from the period 01/11/2019 to 31/10/2020. We forgot to claim input VAT of AED 1.5 million in our first VAT Return (01/11/2019 to 31/01/2020).

So it is possible to claim input VAT of the entire AED 1.5 million in the second VAT Return (01/02/2020 to 30/04/2020) or we need to go for the voluntary diclosure for the first VAT Return (01/11/2019 to 31/01/2020) ?

Replies
SAJITH N18/05/2020 19:01:18

The purpose of permitting the first supply of residential building to be treated as a zero rated supply is to enable taxable persons to recover the cost of development. However since there is no provisions of the Law relating specifically for input recovery of such costs, the normal recovery rules as per Article 54 and 55 of DL should apply. In the above case the development costs are incurred prior to registration and presuming that AED 1.5 million not claimed in the first tax period pertains to pre-registration period, Article 56 of DL would apply which states that the pre-registration inputs should be claimed in the 1st return subsequent to registration. Considering the above, my view is that you would have to submit a VD for the period 01/11/2019 to 31/01/2020. The possible flip side to submitting a VD is that a penalty of AED 3,000 maybe imposed but considering the input benefit being derived, VD does not pose a material risk.

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CA Rahib Tinwala18/05/2020 19:12:44

Thank you sir for such a valuable advise.

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