VAT Input Tax Recovery: What You Can and Cannot Claim (With Real Examples)

VAT Input Tax Recovery: What You Can and Cannot Claim (With Real Examples)

Most businesses are losing thousands of dirhams every year by not claiming input VAT correctly. This practical guide shows you exactly what you can and cannot claim, with real examples that will help you recover more VAT and improve your cash flow.

What is Input VAT Recovery?

Input VAT recovery is claiming back the VAT you paid on business expenses. If you're VAT registered, you can recover VAT on most business purchases, which can significantly improve your cash flow.

✅ What You CAN Claim (With Examples)

🏢 Office and Business Expenses

🚗 Business Travel and Transport

💻 Technology and Software

❌ What You CANNOT Claim (With Examples)

🎉 Entertainment and Personal Expenses

🏠 Residential Property

🔄 Partial Recovery Scenarios

Mixed Business and Personal Use

Exempt vs Taxable Activities

📋 Documentation Requirements

Essential Documents for Input VAT Recovery

• Valid Tax Invoice: Must include supplier's TRN, your TRN, and VAT amount
• Payment Evidence: Bank statement or payment receipt
• Business Purpose: Clear evidence of business use
• Supporting Documents: Contracts, agreements, or business records

Example of Valid Tax Invoice

💰 How to Maximize Your Input VAT Recovery

Step-by-Step Process

1. Review All Expenses: Go through every business expense
2. Identify VAT Amount: Check if VAT was charged
3. Verify Business Purpose: Ensure expense is business-related
4. Check Documentation: Ensure you have valid tax invoices
5. Calculate Recovery: Determine recoverable amount
6. Include in VAT Return: Add to input VAT section

Common Mistakes to Avoid

• ❌ Claiming personal expenses - Always verify business purpose
• ❌ Missing documentation - Keep all tax invoices
• ❌ Incorrect apportionment - Calculate mixed use correctly
• ❌ Late claims - Claim within the time limit
• ❌ Ignoring small amounts - Every dirham counts

📊 Real Business Impact

Example: Small Business Input VAT Recovery

🔍 FTA Audit Checklist

What FTA Looks For

• Valid Tax Invoices: All invoices must be complete
• Business Purpose: Clear evidence of business use
• Timely Claims: Claims within the time limit
• Proper Apportionment: Correct calculation for mixed use
• Supporting Documentation: Contracts, agreements, etc.

💡 Pro Tips for Maximum Recovery

• Review monthly: Don't wait until year-end
• Keep detailed records: Document business purpose
• Use accounting software: Automate VAT tracking
• Train your team: Ensure everyone understands the rules
• Seek professional advice: For complex scenarios

Conclusion

Input VAT recovery can significantly improve your cash flow and reduce your overall tax burden. By understanding what you can and cannot claim, and following proper procedures, you can maximize your VAT recovery and avoid costly mistakes.

Need help maximizing your input VAT recovery? Our expert team can review your expenses, identify missed opportunities, and ensure you're claiming everything you're entitled to. Contact us today for a free input VAT review.

Documentation Requirements

Proper documentation is essential for successful input VAT recovery:

• Valid Tax Invoices: Must include all required information
• Business Purpose Evidence: Proof of business use
• Payment Records: Evidence of payment made
• Supporting Documents: Contracts, agreements, and receipts
• Digital Records: Electronic copies of all documents

Input VAT Recovery Process

1. Identify Qualifying Expenses: Review all business expenses
2. Verify Documentation: Ensure all required documents are available
3. Calculate Input VAT: Sum up all qualifying input VAT
4. Prepare VAT Return: Include input VAT in your return
5. Submit and Claim: File return and claim recovery
6. Monitor Refunds: Track refund processing and timing

Partial Recovery Rules

For businesses making both taxable and exempt supplies:

• Direct Attribution: Attribute expenses directly where possible
• Apportionment Method: Use approved apportionment methods
• Annual Adjustment: Perform annual adjustment calculations
• Documentation: Maintain detailed records of apportionment

Common Recovery Mistakes

• Missing Documentation: Incomplete or missing tax invoices
• Incorrect Classification: Misclassifying personal vs business expenses
• Late Claims: Missing the deadline for claiming input VAT
• Incomplete Records: Poor record keeping and organization
• Apportionment Errors: Incorrect partial recovery calculations

Best Practices for 2025

• Regular Reviews: Monthly review of input VAT claims
• Digital Systems: Use accounting software for tracking
• Professional Advice: Seek expert guidance for complex cases
• Documentation Management: Implement robust document management
• Training: Train staff on input VAT requirements

Conclusion

Effective input VAT recovery can significantly improve your business cash flow and reduce overall tax burden. By following proper procedures and maintaining accurate records, you can maximize your input VAT claims while ensuring compliance.

Need help with input VAT recovery? Our expert team can assist with identifying qualifying expenses, preparing documentation, and maximizing your input VAT claims. Contact us today for professional assistance.