Definition

An Input VAT Adjustment refers to the correction or modification of input VAT previously claimed by a UAE business, typically due to changes in the use, value, or eligibility of purchased goods or services. Adjustments ensure that the input VAT recovered aligns with actual taxable use in accordance with UAE VAT Law.

Key Points

• Required when the intended use of a purchase changes (e.g., from taxable to exempt activities).
• Must be reported in the VAT return for the period in which the adjustment arises.
• Common reasons include credit notes, purchase returns, or change in business use.
• Businesses must maintain detailed records of adjustments for FTA audits.
• The Input Tax Apportionment and Capital Assets Scheme rules may also trigger adjustments.

Practical Example

A company initially uses a delivery vehicle for taxable supplies and claims full input VAT. Later, it begins using the vehicle for exempt deliveries. The business must adjust the previously claimed input VAT proportionally in its next VAT return.

Why It Matters

Accurate input VAT adjustments ensure compliance with UAE VAT regulations, prevent overclaiming of tax credits, and reduce the risk of FTA penalties during audits.