In the UAE, input tax refers to the Value Added Tax (VAT) that a business pays on the goods and services it purchases from suppliers. It is a tax paid by the business on its purchases and is recoverable from the UAE Federal Tax Authority (FTA) if the business is registered for VAT.
The input tax is an essential component of the VAT system, which is designed to be a tax on consumption. The VAT paid on inputs is deducted from the VAT collected on sales to determine the net VAT payable to the FTA. In this way, the VAT system avoids taxing the same value multiple times and only taxes the value added at each stage of the supply chain.
To claim input tax, a business must have valid tax invoices or other acceptable documentation for its purchases. The input tax can be claimed as a credit against the output tax liability on the business's VAT return. If the input tax exceeds the output tax, the excess can be carried forward to subsequent tax periods or refunded to the business by the FTA.
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Understanding Input Tax in the UAE: Explained Simply
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