Partial exemption with residential rent
Our company sells goods and also rents out a residential building. How much input VAT can we claim?
The situation
Input VAT on costs for exempt supplies, such as residential rent, is not recoverable. Costs used for both need apportionment.
The law
- Art 54, Federal Decree-Law 8 of 2017: Input tax recoverable only for taxable supplies
- Art 46, Federal Decree-Law 8 of 2017: Residential leasing is exempt
What it means for you
Example: shared office costs with AED 20,000 VAT, and taxable sales are 75 percent of total supplies. You recover about AED 15,000 and adjust at year end. VAT on building repairs is not recoverable at all. Keep a clear apportionment working.
What to do
- Split costs into taxable, exempt and shared.
- Recover VAT on taxable-only costs.
- Apportion shared costs.
- Do the annual adjustment.
We can do this for youVAT return filing (VAT201) on EmaraTax: output and input VAT, reverse charge, corrections and payment: AED 850