Saudi Arabia Input Tax Explained - Common Questions Answered

Can I deduct input tax while filing VAT?

Yes, you can deduct input tax if your business provides the following types of supplies:

• Taxable supplies:

All domestic goods and services that are taxable at 5% or zero-rated.

• Supplies within GCC:

Import of goods and services from GCC countries that have implemented VAT (if the GCC country has not implemented VAT, the supply will be treated as if it came from outside the GCC).

• Imports from outside the GCC:

All imported goods and services that are taxable at 5% or zero-rated.

Can I deduct input tax on all of my transactions?

Input tax can’t be deducted if the supply is exempted from VAT.

When can I deduct input tax?

• If you use the accrual basis for your accounting, you can deduct input tax in the period in which the supply is invoiced.
• If you do cash accounting, you can deduct input tax only in the period in which the invoice is actually paid.

Can I deduct input tax paid on my capital assets?

Yes, you can deduct input tax that you paid on your capital assets if you bought them after VAT registration and meet these two conditions:

• You paid the full amount upfront.
• You use the capital assets to produce supplies which are either standard rated (5%) or zero-rated(0%).

I pay for my capital assets in installments. Can I deduct input tax?

If the price for a capital asset is paid in installments, VAT is accounted with the periodic payments in line with the general principle of tax points.

I bought my capital goods before I registered for VAT. Can I deduct input tax for them?

If a capital asset is bought before VAT registration, and tax has been paid for it, the buyer can still deduct input tax after registration. The value of the input tax deduction is capped by the asset’s net book value. The net book value must be determined in accordance with your accounting standards (for instance, straight line depreciation).

Can I deduct the input tax that I pay on sports services?

No, the input tax paid on sports services is not eligible for deduction.

Can I deduct the input tax that I pay on entertainment services?

No, the input tax paid on entertainment services is not eligible for deduction.

Can I deduct the input tax that I pay on cultural services?

No, the input tax paid on cultural services is not eligible for deduction.

Can I deduct the input tax that I pay on catering services in hotels, restaurants and other similar venues?

No, the input tax paid on catering services is not eligible for deduction.

Can I deduct the input tax that I pay on goods and services that I use for private or non-business purposes?

No, goods and services used for private or non-business purposes are not eligible for input tax deduction.

Can foreign businesses visiting the UAE recover VAT?

To encourage visits by foreign companies to the UAE, there is a process in place for them to recover the VAT they incur while in the UAE. Since many countries have implemented VAT, this also ensures that UAE businesses can recover the VAT they pay when visiting other countries.