FTA issued VATGIT1 on Input Tax apportionment and special methods.
The UAE Federal Tax Authority (FTA) has published a VAT guide on Input Tax Apportionment Value Added Tax – VATGIT1.
The purpose of this guide is to provide guidance on Input Tax apportionment and the special Input Tax apportionment methods which may be used by certain types of entities where the standard Input Tax-based apportionment method does not yield a fair and reasonable result.
The guide provides an overview of the general Input Tax apportionment rules, the available special methods of Input Tax apportionment, and the determination of the SRP. It also outlines the process for applying for approval to use a special Input Tax apportionment method and/or the SRP.
This extensive guide from the FTA outlines the procedures for Value Added Tax (VAT) Registrants in the UAE concerning Input Tax apportionment, specifically addressing how businesses can recover VAT incurred on expenses when they make both taxable and exempt supplies.
The guide details the standard inputs-based apportionment method, which uses a formula based on recoverable versus non-recoverable Input Tax, and the required annual washup and actual use adjustments that Registrants must perform.
Crucially, it elaborates on special apportionment methods—including outputs-based, transaction count, floorspace, and sectoral methods—available to businesses for whom the standard approach is unfair, and also introduces the Specified Recovery Percentage (SRP) as an alternative for simplified tax calculation across periods.
Finally, the guide explains the application process for these special methods or the SRP via the EmaraTax portal, detailing eligibility, required documentation, and validity periods for FTA approvals.
