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How to Apply for a Special Input Tax Apportionment Method in the UAE

This guide is for businesses in the United Arab Emirates (UAE) that need to apply for a special input tax apportionment method.

What is Input Tax Apportionment?

Input tax is the value-added tax (VAT) that a business incurs on its purchases. In the UAE, businesses can only recover input tax that is used for making taxable supplies. If a business also makes exempt supplies or incurs expenses that are not related to its taxable activities, it will need to apportion its input tax between taxable and non-taxable supplies.

The Standard Method of Input Tax Apportionment

The Federal Tax Authority (FTA) of the UAE has a standard method for input tax apportionment. This method is based on the proportion of a business's taxable supplies to its total supplies.

When to Apply for a Special Input Tax Apportionment Method

The standard method of input tax apportionment may not be fair and reasonable for all businesses. For example, a business that makes a mix of taxable and exempt supplies, but the nature of its supplies makes it difficult to directly track the input tax that relates to each type of supply. In such cases, a business can apply to the FTA for a special input tax apportionment method.

How to Apply for a Special Input Tax Apportionment Method

To apply for a special input tax apportionment method, you will need to complete and submit the Application Form for Input Tax Apportionment. The form can be found on the website of the FTA.

The Application Form

The application form is divided into six sections:

• About the Applicant
• Contact Details of the Applicant
• About the Request for Input Tax Apportionment
• About the Special Method for Input Tax Apportionment
• Authorised Signatory
• Declaration

In the About the Request for Input Tax Apportionment section, you will need to provide the following information:

• Whether you have previously requested a special input tax apportionment method approval from the FTA
• The reference number of the previous decision (if applicable)
• The date of the previous decision (if applicable)
• The first tax period from which the approved method was applied (if applicable)
• The method approved in the previous decision (if applicable)

In the About the Special Method for Input Tax Apportionment section, you will need to explain why you are requesting a special input tax apportionment method and provide a description of your business activities, including:

• The industry your business is in
• The exempt supplies you make
• The taxable supplies you make
• The non-business activities of the business
• The expenses that are wholly attributable to exempt supplies or non-business activities
• The expenses that are wholly attributable to taxable supplies
• The residual input tax

You will also need to specify the special method that you wish to apply and upload a calculation sheet applying the standard method.

If you are applying for a non-sectoral method, you will also need to provide a justification for the method selected and upload a calculation sheet applying the proposed method.

If you are applying for a sectoral method, you will need to identify the method for allocating expenses between sectors and provide a justification for selecting a sectoral method.

Finally, you will need to complete the declaration section and submit the form.

Once you have submitted the application form, the FTA will review your application and let you know their decision.

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