What is input tax? How UAE businesses recover VAT on purchases

Input tax covers the 5% charged by your UAE suppliers and the VAT you self-account for on imports under the reverse charge. Article 54(1) of Federal Decree-Law No. 8 of 2017 allows recovery where the goods or services are used to make taxable supplies, certain supplies made outside the UAE, or other supplies listed in the Executive Regulation.

Article 55(1) adds the evidence and payment tests: hold the tax invoice (or import documents), pay the consideration, and keep electronic invoices where they are required.

Input tax is cash. A Dubai café spending AED 60,000 plus VAT a quarter on stock, rent and equipment has AED 3,000 of input tax. If its sales VAT is AED 7,500, it pays AED 4,500 instead of AED 7,500. Lose the invoices, or buy from a supplier who did not put a TRN on the bill, and that saving disappears.

Some input tax is never recoverable. Article 53 of the Executive Regulation blocks entertainment for non-employees, motor vehicles available for personal use, and most free personal benefits for staff. Businesses with exempt sales must also apportion shared input tax.

The AI agent captures bills from email, photos and uploads, reads the supplier, TRN, amounts and VAT in Arabic or English, and posts them for approval with the image attached. Payment status comes from matching your uploaded bank statements. Input tax goes into the draft return only when the bill is approved, has its tax invoice and has been paid, and the agent lists anything it held back with the reason.

Businesses can ask for their own AI categorisation rules, for example always treating a particular hotel supplier as blocked entertainment, by emailing hello@hellobooks.ai.

The other half of every VAT calculation.

• Output tax
• Blocked input tax
• Apportionment
• Tax invoice
• Reverse charge