Definition

Input VAT is the value‑added tax a business pays on goods and services purchased in the UAE. Registered businesses can generally recover this tax by offsetting it against their Output VAT (the VAT charged on sales). Proper documentation is required to claim input VAT credits through the Federal Tax Authority (FTA).

Key points

• Recoverable only if the purchase is for business purposes.
• VAT invoices must contain the supplier’s TRN and all mandatory details.
• Certain expenses (like personal use, entertainment, or blocked items) are non‑recoverable.
• Input VAT must be recorded and reported in the VAT Return (Form VAT201).
• Incorrect claims may lead to penalties from the FTA.

Practical example

A marketing agency buys laptops worth AED 50,000 + AED 2,500 VAT. The AED 2,500 is input VAT. In its next VAT return, the agency can offset this AED 2,500 against the output VAT collected from clients.

Why it matters

Recovering input VAT correctly reduces a business’s tax liability and ensures compliance with UAE VAT law. Bookkeeping systems must track all eligible purchases to maximize claims and avoid penalties.