A Strategic Look at the New Rules for Input Tax Recovery & Apportionment

The Federal Tax Authority (FTA) has published an updated version of the VAT Guide on Input Tax Apportionment (VATGIT1) in September 2025. This update incorporates changes introduced by Cabinet Decision No. 100 of 2024, which amended the VAT Executive Regulations.

A significant development is the introduction of the Specified Recovery Percentage (SRP), effective from 15 November 2024. Eligible taxable persons can now apply to use a predetermined recovery rate for apportioning residual input tax, simplifying compliance and “reducing” the administrative burden of calculating a new apportionment rate for each tax period.

Key Updates briefly:

Specified Recovery Percentage (SRP):

• What it is: Businesses can apply to use a fixed recovery percentage based on their previous tax year's calculated rate.
• How it works: Once approved by the FTA, the SRP is applied to all tax periods in the subsequent year, eliminating the need for quarterly calculations. An SRP approval is valid for four years, with a lock-in period of two years during which the method cannot be changed.

• Strategic Benefit: The SRP provides predictable cash flow and drastically reduces administrative costs for businesses with stable recovery patterns. It’s a welcome relief from the volatility of period-by-period calculations.
• Eligibility Criteria: Applicants must have been VAT-registered for at least 12 months and make a mix of taxable and exempt/nonbusiness activities.
• Application Channel: Applications for SRP must be submitted via the Emaratax portal.
• FTA Response Times: The FTA will respond to applications within 40 business days for non-sectoral methods and 60 business days for sectoral methods.
• Applicant Deadlines: Applicants must respond to FTA requests for further information within 40 business days.
• Emaratax Efficiency: Draft applications must be completed and submitted within 40 business days of initiation, as the portal will issue automated reminders and may close incomplete applications.

Business Implications & Strategic Recommendations:

• Evaluate SRP Eligibility Immediately: If you have been VAT-registered for over 12 months, conduct an internal review. Does your input tax recovery pattern justify the switch to an SRP? The long-term administrative savings can be substantial!
• Audit Your Application Readiness: Whether applying for an SRP or a special apportionment method, your application must be flawless. Ensure all calculations are reconciled perfectly with filed VAT returns and supported by verifiable data.
• Review Your Compliance Calendar: Integrate the 40-day response deadline into your internal workflows to avoid the risk of automatic application closure and wasted resources.

“Navigating these changes effectively requires expert guidance. At Crowe UAE, we specialize in helping businesses like yours adapt to regulatory updates, secure FTA approvals, and optimize their VAT position.”