VAT Regime was introduced in UAE on January 1, 2018. It has been almost one year in the introduction of VAT in UAE and we are pretty sure that businesses enterprises are aware of how to claim for the Input VAT recovery.
The UAE government also has clearly mentioned the conditions for the businesses while there is also a detailed list expense wherein the businesses are allowed to recover the Input VAT.
The eligibility of Input VAT has clearly mentioned under the VAT regime. However, there are various types of expenses which people might think not directly related to outward supplies but VAT has allowed people to claim Input VAT recovery on it.
In this article, we are going to tell you about 7 types of expenses which have been frequently incurred by the businesses and they are eligible to recover Input VAT on it.
Table of Contents
Input VAT Recovery on 7 business expenses
1. Food and drinks For Customer or clients
If an employer has offered lunch, soft drinks, coffee or any kind of beverages to the customers during the course of the business meeting then the businesses are liable to claim for Input VAT. If providing additional benefits to the customers by presenting gift, movies or lunch in this case businesses would not be liable to claim input VAT on it.
From the above definition, it is clearly stated that the VAT regime allows taxpayers to claim Input VAT on the entertainment expenses only if it is incurred during the course of business meeting otherwise it is totally restricted.
2. Fuel expenses
For instance, if you deal in supplying goods and on the daily routine basis you incurs petrol expenses to deliver goods to the customers in this condition businesses would be allowed to recover input VAT. However, it can be applied in both personal and professional purpose. It is quite difficult to evaluate and distribute the Input VAT recovery. People who are working in the marketing field are allowed to claim petrol expenses.
3. Employee Conveyance Expense
Under the Employment Contract Act, it is clearly mentioned that the conveyance facility should be provided to the employees during the late night hours which includes ‘To’ and ‘From’ the office. Here the business can claim for the petrol expenses incurred by them under the VAT regime.
Reason being a contractual obligation or the documented policy of the organization which has included the said services to the employees for assisting them in performing job responsibility and is a normal business practice.
4. Visa to employee Expenses
The Visa Cost of expat employees has been incurred by businesses in UAE and they pay 5 percent of the cost of Visa. Therefore, businesses would be allowed to recover the input VAT on such kind of expenses. Here, the Visa cost incurs by business enterprises allow employees to perform his duties and it is a normal course of the business activity.
5. Employee Medical insurance Expenses
Businesses in Dubai provides health insurance facility to their employees and pay 5 percent VAT on it. Under the VAT regime, the business can claim for the VAT paid on medical insurance which should be compulsorily provided to the employees.
6. Expenses on legal consultation
In case a business firm indulged in the supply of taxable goods has paid Value added tax on the legal fees on a continuous basis for getting legal consultation service from a legal consultancy, is entitled to get the VAT paid on legal services by the business firm even if it is not directly attached to the supply of goods.
Reason being the non-necessity of link each & every purchase with the outward supply within the business unit as various purchases such as the legal consultancy is used by the business firm other than the supply
7. Service industry Capital Expenditure
For instance, law-based firm deals in supplying taxable services has purchased the new furniture or office table for its employees. Although, the law firm has been using the furniture or table to perform its taxable activities so the law firm is liable to claim for the input VAT incurred on purchasing the new furniture.