Reclaim tax paid before VAT registration in UAE

Article 56 of the Decree Law allows the recovery of input tax paid on goods, services and imported goods prior to the date of VAT registration, “provided that these goods and services were used to make supplies that give the right to input tax recovery upon tax registration”.

Input VAT is the VAT charged by your suppliers on goods and services purchased. This means you can only recover VAT paid before registration if VAT charged on the same goods and services post registration would be recoverable. You should understand the exclusions to input tax recovery contained in the full decree law and executive regulations and apply the same rules that apply to input VAT recovery generally when determining how much pre-registration input VAT can be offset.

There are four exceptions to this rule listed in the decree law.

• The first is receipt of goods and services for purposes other than making taxable supplies.
• The second is for input tax related to capital assets that are already partially depreciated before the date of registration, for example, if you purchase a fixed asset with an expected life of five years and when you register for VAT the asset has only two years of use left, you can only reclaim two fifths of the VAT you originally paid.
•  The third exception is for services received more than five years prior to the date of registration.
• Cant reclaim input tax paid if you have moved goods to another implementing GCC state prior to the registration in that state. This is because if you supply goods to another GCC state then the recovery of input tax is permitted only in that other state. Therefore, to recover input VAT you need to be registered in that other GCC state.