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VAT on capital asset paid will be recovered over a period of 10 consecutive years or part thereof for building or 5 consecutive years or part thereof for other capital assets. The period for recovering VAT paid will commence on the day on which the owner first uses the capital asset for the purpose of business.

Assets which qualify as the capital asset:

  1. Any asset amounting to AED 5,000,000 or more excluding tax, on which tax is payable
  2. The asset is acquired for the purpose of business, which has estimated useful life of more than:
    • 10 years in case of a building or part thereof
    • 5 years for all capital assets other than a building or part thereof

Will stage payments made for asset qualify as a capital asset?

Where expenditure is consisting of smaller sums but collectively amounts to AED 5,000,000 or more will qualify as single expenditure if:

  1. Staged payments are made for the purchase of the building
  2. For the construction of a building
  3. Relation to an extension, refurbishment, renewal, fitting out, or other work undertaken to a building
  4. For the purchase, construction, assembly or installation of any goods or immovable property where components are supplied separately for assembly

Summary

Capital assetValueUseful LifeInput VAT Recovery
Building5,000,000 or more10 yearsOver a period of 10 years
Other capital assets5,000,000 or more5 yearsOver a period of 5 years
BuildingLess than 5,000,00010 yearsWill be recovered in the tax period in which asset is purchased
Other capital assetsLess than 5,000,0005 yearsWill be recovered in the tax period in which asset is purchased
Building5,000,000 or moreLess than 10 yearsWill be recovered in the tax period in which asset is purchased
Other capital assets5,000,000 or moreLess than 5 yearsWill be recovered in the tax period in which asset is purchased

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The entire contents of this article is solely for information purpose and have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation.. It doesn't constitute professional advice or a formal recommendation. The author has undertook utmost care to disseminate the true and correct view and doesn't accept liability for any errors or omissions. You are kindly requested to verify & confirm the updates from the genuine sources before acting on any of the information's provided herein above.

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