Which expenses have blocked input VAT in the UAE?

Article 54 - Recoverable Input Tax 1. The Input Tax that is recoverable by a Taxable Person for any Tax Period is the total of Input Tax paid for Goods and Services which are used or intended to be used for making any of the following: a. Taxable Supplies. b. Supplies that are made outside the State which would have been Taxable Supplies had they been made in the State. c. Supplies specified in the Executive Regulation of this Decree-Law that are made outside the State, which would have been treated as exempt had they been made inside the State. 2. Where Goods are imported by a Taxable Person through another Implementing State and the intended final destination of those Goods was the State at the time of Import, then the Taxable Person shall be entitled to treat the Tax paid in respect of Import of Goods into the Implementing State as Recoverable Tax subject to the conditions specified the Executive Regulation of this Decree-Law. 3. Where Goods were acquired by a Taxable Person in another Implementing State and then moved into the State, the Taxable Person shall be entitled to treat the Tax paid in respect of the Goods in the Implementing State as Recoverable Tax subject to the conditions specified in the Executive Regulation of this Decree-Law. 4. A Taxable Person shall not be entitled to recover any Input Tax in respect of Tax paid in accordance with Clause 2 of Article 48 of this Decree-Law. 5. The Executive Regulation of this Decree-Law shall specify the instances where Input Tax is excepted from being recovered. Article 54 (bis)22 1. The Authority shall reject the deduction of the Recoverable Input Tax if it is established to the Authority that the supply subject to the deduction was part of a supply or a chain of supplies related to Tax Evasion, and the Taxable Person was aware of this relation upon deducting the Recoverable Input Tax. 2. The Authority may reject the deduction of the Recoverable Input Tax if it is 22 Article added as per Federal Decree-Law No. 16 of 2025. Federal Decree-Law No. 8 of 2017 and its amendments – As published by the Ministry of Finance 26 established to the Authority that the supply subject to the deduction was part of a supply or a chain of supplies related to Tax Evasion, and the Taxable Person should, based on circumstances of the supply, have been aware of this relation. 3. For the purposes of applying the provisions of Clause 2 of this Article, the Taxable Person shall be considered to have been required to be aware that the supply was part of a supply or a chain of supplies related to Tax Evasion, if he did not verify the validity and integrity of the supplies he receives before deduction of Input Tax, in accordance with the measures, procedures and conditions determined by the Authority in this regard.

10.5.1. The recipient must hold the required evidence of their purchase Input tax can only be claimed by the recipient of goods or services if the recipient holds the required evidence in respect of the supply. The required evidence takes several forms, the most common of which is a tax invoice. A tax invoice is a document which must satisfy certain conditions (see Chapter 12 for further details regarding tax invoices). In some situations, the recipient will not be able to obtain a valid tax invoice – for example, if the supply is made by a non-resident and was subject to the reverse charge in the UAE. In these circumstances, the recipient is able to evidence the supply by obtaining and retaining the following documents:   the supplier’s invoice showing details of the goods and services; in the case of imported goods, a statement from the relevant Customs authority showing details of the imported goods. If the taxable person has not received the tax invoice or other acceptable documentation in the tax period when the supply was made, they may deduct the input tax in the tax period in which the tax invoice or the alternative documents are received. 10.5.2. The person must have paid or intend to pay for the supply The amount of input tax that can be reclaimed by a taxable person is the amount of input tax that relates to the portion of consideration for the supply that has already been paid. However, the condition will also be met if the person intends to make the payment within six months of the due date of payment. For example, if the supplier has only issued a partial invoice for the supply and the recipient made the payment, the recipient can only recover VAT for the payment made. The recipient cannot recover VAT in respect of the portion of consideration which has not yet been invoiced or paid. 10.6. Blocked input tax Input tax on certain expenses incurred by a person is specifically blocked from being recoverable. Such expenses are:    entertainment expenses; motor vehicles used for personal purposes; and employee-related expenses. 10.6.1. Entertainment expenses A business is generally prohibited from recovering input tax on expenses incurred in respect of the provision of entertainment to anyone not employed by the business, including customers, potential customers, officials, shareholders, owners, and investors in the business. 39 VAT Guide | Taxable Person | VATG001

Your Entitlement to recover input tax A registrant may recover the input tax incurred on the purchase of goods and services in the course of business subject to keeping records andtax invoices that determine the value of VAT charged by suppliers, and which proves that VAT was paid on such goods or services. The total tax incurred during any tax period should be disclosed in the tax return for that tax period. Blocked input tax Input tax incurred by a registrant may be blocked from recovery. Such expenses are: - Entertainment costs; - Motor vehicles used for personal purposes; and - Employee-related expenses.

Article (45) Restrictions on Input Tax Deductions Input Tax that has been borne cannot be deducted in either of the following cases: 1. If it is for purposes other than Economic Activities as determined by each Member State; 2. If it is paid on Goods that it is prohibited to deal in in the Member State according to applicable laws.

Article (46) Proportional Deduction 1. If Input Tax is related to Goods and Services used to make Taxable Supplies and non-Taxable Supplies, then Input Tax cannot be deducted save within the limits of the proportion referable to the Taxable Supplies. 2. Each Member State may determine the methods of calculating the deduction rate and the conditions for treating the value of non-deductible Input Tax as zero. Page 15 of 26 26 من15 صفحة