VATP on Input Tax Recovery

VATP on Input Tax Recovery

The FTA has issued Public Clarifications on specific input tax recovery scenarios.

Common Topics Covered

1. Entertainment expenses: Whether specific types of staff entertainment (e.g., team lunches at the office) are blocked or recoverable.
2. Cars and vehicles: Whether specific vehicle types (e.g., delivery vans, company cars) qualify for input tax recovery.
3. Mixed-use purchases: How to apportion input tax on purchases used for both business and personal purposes.
4. Pre-registration input tax: Whether specific types of pre-registration expenses qualify for recovery.
5. Capital assets: How to handle input tax on large capital purchases (e.g., buildings, equipment).

How VATP Clarifications Help

Without a clarification, taxpayers may be uncertain whether a specific expense is recoverable. The VATP provides certainty by stating the FTA's position on the specific scenario.

Example Scenarios

Scenario 1: A company provides free meals to staff in the office cafeteria. Is the VAT on these meals recoverable?

• A VATP clarification may state that meals provided at the workplace are NOT entertainment (they are a business expense) and input tax is recoverable.

Scenario 2: A company purchases a car for use by its sales team. Is the VAT recoverable?

• A VATP clarification may state that cars used for non-business purposes are blocked, but cars used exclusively for business (e.g., sales team vehicles used only for client visits) may qualify for recovery with proper documentation.

Applying VATP Clarifications

1. Match your scenario to the clarification.
2. Ensure all conditions stated in the clarification are met.
3. Maintain documentation proving compliance with the conditions.
4. If your scenario is close but not identical, seek professional advice.

Important Note

VATP clarifications may be updated or superseded by newer clarifications or legislative amendments. Always check that you are using the most recent version.