Input VAT Adjustments under Capital Assets Scheme


A mechanism by which the adjustment of the recovered input tax on the capital assets occurs, it is referred to as the capital assets scheme. The adjustment is basically carried out in a time period of almost 10 or 5 years.

It will solely depend upon the usage whether you would be able to recover the input VAT or not in the first year.

It is to be noted here that if there come any changes in the input tax, the need of the adjustment will arise and if there are any sort of changes in the taxable supplies or another sort of supplies, you might need to pay additional VAT to the authorities.

Not that the authority regarding the VAT is FTA.

There may arise so many scenarios in this case. Sometimes what happens is that the VAT is recovered by the person as they show that they want to make the taxable supplies but in actual, they start making the supplies that are nontaxable. In such a case, the person has to pay additional VAT to FTA because the things didn’t go the way they were supposed to go.

Another important thing here is that if a person recovers VAT which is less than the citing and writes in it that all of it will be used for the sake of for taxable supplies and exempt/non-taxable supplies but when the time reaches, it is used for making the supplies that are taxable then the person can ask for more VAT recovery from the FTA. Note that taxable supplies that have been made are more than they were intended to be. This is the reason why the person can then get additional VAT recovery.


Here is how you can be able to calculate the Input VAT adjustment under Capital Assets Scheme

By using the following formula, the Input VAT adjustment under Capital Assets Scheme can be easily calculated;

 (Total input tax on capital item * Change in use (Original taxable use % – actual taxable use %)) / Adjustment period (useful life)

First of all, you need to identify what the total VAT input on the capital good is.

After doing so, the second step will comprise of dividing the total input tax with the useful life of the assets.

Know that the total input tax with the life of assets will be 10 years in case of a building but it will be 5 years in all other cases.

In the third step, you need to multiply the resulting number from the above with the change in usage.

In the third step, you will get the Input VAT adjustment. His will basically either result in the additional payment of the additional recovery. It will depend upon the situation to situation as they were mentioned above.

Vat agent UAE can guide the people in a very good way regarding such things.

If you need other tax-related assistance, you can get the help of the Certified tax agent UAE. they have a great potential of helping you and in case of the need for further legal information, you can literally trust them.

" data-link="">">Tweet