Amendments to the VAT Guide on Input Tax Apportionment – VATGIT1

April 22, 2026

The Federal Tax Authority (FTA) in the United Arab Emirates (UAE) has amended Input tax apportionment guide – VATGIT1 on 30^th September, 2025. We have summarised the key highlights below –

Input Tax Apportionment

Input tax apportionment is a process of calculating how much input tax you are allowed to claim back when expenses are partly for taxable supplies and partly for exempt or non-business use.

Specified Recovery Percentage (SRP)

SRP is a new method introduced by FTA, under this method business are allowed to use a fixed recovery rate based on the prior year’s actual recovery rate. A taxable persons can submit an application to the FTA to adopt a fixed recovery percentage this approach helps reduce the effort of recalculating the recovery ratio for every tax period.

Eligibility to apply for SRP:

Applicants must have been registered for VAT for a minimum of 12 months.
Applicants must be making taxable supplies , exempt supply such as financial services and supplies that are made outside the UAE which would have been considered taxable had they been made in the UAE.
Application is made to the FTA by either the authorized signatory, tax agent or by the legal representative.

Requirements for submitting an application for Special Input Tax apportionment to the FTA

Applicants are required to provide the following information as part of the request:

A cover letter that contains:
- Detailed description of the Business activities of the Applicant,
- The special Input Tax apportionment method to be used, and
- The reasons for applying for a special Input Tax apportionment method.
Historical calculations of Residual Input Tax apportionment in Excel format using the standard method of apportionment. The calculations should be for the period of 12 months preceding the application (as applicable or a shorter period if the business has been conducted for less than 12 months)
Calculations of the Residual Input Tax apportionment in Excel format for the same period as above but using the special method requested by the Applicant.
Where an application is submitted for a sectoral method, the Applicant is required to provide the special apportionment method calculations separately for each sector included in the request, along with a clear description of the activities and nature of each sector.
Applicants must ensure that all figures and details included in the calculations are fully aligned and reconciled with the Tax Returns that have been filed with the FTA for the respective Tax Periods.

Response times highlighted

FTA’s standard response times remain unchanged:

40 business days for non-sectoral method requests
60 business days for sectoral method requests

Applicants are required to reply to any queries raised by the FTA within 40 business days.

Validity of Approved SRP

Approval for special input tax apportionment methods is valid for:

4 years for non-sectoral methods
2 years for sectoral methods

Notifying FTA in case of any variance

Registrants must inform the FTA if the actual recovery percentage for the entire tax year differs by more than 10% from the percentage originally reported. Notification to the FTA must be made within 20 business days from the date the variance is identified.

Additional information to be provided as part of the notification includes:

Confirmation of the variance and the date it was detected.
An explanation outlining the reason for the difference.
Information on any changes in business activities.
Details and nature of such changes, if applicable.
Full-year recovery rate calculations, including an Excel-based annual washup.

If a Registrant does not inform the FTA of a variance greater than 10% within 20 Business Days, or fails to reply to the FTA’s request within 40 Business Days, the FTA may decide that the approved special method is no longer applicable from the date the variance was first identified.

Conclusion

This update issued by Federal Tax Authority marks a significant step forward by introduction of the Specified Recovery Percentage (SRP) to reduces administrative burden and closely monitor variance and recovery rates. Businesses must adopt a proactive approach in assessing their eligibility, preparing application and complying on going reporting obligations.