Definition

Input Tax Apportionment is the method used in UAE VAT to allocate input VAT between taxable and exempt supplies when a business makes both.

Key points

• Businesses must use FTA-approved methods to apportion input VAT.
• Usually based on turnover ratios.
• Annual adjustments may be required.
• Ensures only VAT linked to taxable activities is reclaimed.

Practical example

A bank provides VAT-exempt loans and taxable advisory services. It must apportion input VAT on office expenses between exempt and taxable supplies.

Why it matters

Accurate apportionment prevents overclaiming VAT and avoids FTA penalties.