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The FTA has just published updated VAT Input Tax Apportionment Guide. Among other things, the amendments provide additional clarity and examples on the use of special methods

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Input Tax Apportionment
Value Added Tax | VATGIT1
June 2023
VAT Guide | Input Tax Apportionment | VATGIT1 1
Contents
1. Introduction............................................................................................................. 2
1.1. Overview ........................................................................................................... 2
2. Overview of Input Tax Apportionment.................................................................. 4
2.1. Chapter summary............................................................................................. 4
2.2. Entitlement to recover input tax ..................................................................... 4
2.3. Input tax apportionment per tax period.......................................................... 5
2.4. Input tax apportionment – Annual adjustments ............................................ 7
3. Special Apportionment Methods......................................................................... 13
3.1. Outputs-based method.................................................................................. 13
3.2. Transaction Count method............................................................................ 13
3.3. Floorspace method........................................................................................ 14
3.4. Sectoral method............................................................................................. 15
4. Applying for a special input tax apportionment method................................... 18
4.1. How does it work? ......................................................................................... 18
4.2. Who may apply for a special input tax apportionment method?............... 18
4.3. Who can submit the application?................................................................. 18
4.4. Which special input tax apportionment methods to apply for?................. 19
5. Input Tax Apportionment Request Form ............................................................ 21
5.1. What information will you need when completing the Request Form? .... 21
5.2. Submitting the Input Tax Apportionment Request Form............................ 22
5.3. FTA’s decision in respect of the application ............................................... 22
5.4. Notifications relating to change in business............................................... 22
5.5. When to re-apply?.......................................................................................... 23
6. Updates and Amendments .................................................................................. 24
Appendix 1: Completing the Application Form ........................................................ 25
Appendix 2: Example on input tax apportionment................................................... 30
Appendix 3: Common Errors ..................................................................................... 35
VAT Guide | Input Tax Apportionment | VATGIT1 2
1. Introduction
1.1. Overview
1.1.1. Short brief
VAT is a general consumption tax on the supply of goods and services, that applies to
most supplies which take place within the territorial area of the UAE.
1.1.2. Purpose of this document
The purpose of this Guide is to provide guidance on input tax apportionment and the
special input tax apportionment methods which may be used by certain types of entities
where the standard input tax-based apportionment method does not yield a fair and
reasonable result.
The Guide provides:
• an overview of the general input tax apportionment rules and the available special
methods of input tax apportionment;
• an overview of the process to apply for a special method of input tax apportionment;
and
• the information needed to complete the form to apply for a special apportionment
method.
For any additional questions regarding the process to apply for a special input tax
apportionment method, please contact [email protected].
1.1.3. Who should read this document?
This document should be read by any registrant1 who makes a mixture of taxable and
exempt supplies and any other person responsible for, or involved with the apportionment
calculation for such a business.
1.1.4. Legislative references
In this Guide, Federal Decree-Law No. 8 of 2017 on Value Added Tax and its
amendments is referred to as (“Decree-Law”) and Cabinet Decision No. 52 of 2017 on

1 The term “registrant” means a taxable person who has been issued with a tax registration number.
VAT Guide | Input Tax Apportionment | VATGIT1 3
the Executive Regulation of the Federal Decree-Law No. 8 of 2017 on Value Added
Tax and its amendments is referred to as (“Executive Regulation”).
1.1.5. Status of the Guide
This guidance is not a legally binding statement, but is intended to provide assistance
in understanding and applying the VAT legislation with regards to input tax
apportionment and special methods for input tax apportionment.
This guide replaces the Input Tax Apportionment: Special Methods VAT Guide
(VATGIT1) published in December 2019 and March 2023.
VAT Guide | Input Tax Apportionment | VATGIT1 4
2. Overview of Input Tax Apportionment
2.1. Chapter summary
In conducting its business activities, a person may incur expenses which are subject to
VAT (VAT incurred by a person is called “input tax”). This VAT can be recovered by a
taxable person, subject to certain conditions being met. Consequently, VAT should,
generally, not be a cost to a taxable person where such expenditure is incurred to make
taxable supplies. However, where the taxable person is not able to recover the VAT
incurred in respect of goods or services, the person is, in effect, treated as the endconsumer of those goods or services, and VAT becomes a cost to the business.
2.2. Entitlement to recover input tax
A taxable person is entitled to recover input tax incurred on the purchase of goods and
services where certain conditions are met. Thus, the recovery of input tax will be permitted
where acquired goods and services are used, or intended to be used, in making any of
the following:
2
• Taxable supplies;
• Supplies that are made outside the UAE which would have been considered taxable
had they been made in the UAE; and
• Supplies of financial services which would have been treated as exempt if made in the
UAE, but which are provided to a person who is outside the UAE at the time of the
supply, and the services are treated as taking place outside the UAE.
A taxable person is entitled to full input tax recovery in respect of goods and services
used (or intended to be used) for any of the above purposes. In contrast, where the goods
or services are used (or intended to be used) solely for non-business purposes or to make
solely exempt supplies, the person will not be able to recover any of the input tax incurred.
In certain circumstances, goods or services will be used partly in the course of making
supplies that allow for the recovery of input tax and partly for other purposes that do not
allow input tax recovery. Where an expense is incurred for the making of such mixed
business activity, the taxable person must determine the actual portion of the input tax on
the expense that can be recovered.

2 Article 54(1) of the Decree-Law.
VAT Guide | Input Tax Apportionment | VATGIT1 5
2.3. Input tax apportionment per tax period
Input tax which is incurred in respect of goods or services which are used partly for making
supplies that allow for VAT recovery and partly for other purposes for which VAT is not
recoverable is referred to as “residual input tax”. Residual input tax must be apportioned
between those activities. Recovery will be restricted to the portion relating to supplies that
allow for VAT recovery.
Step 1: Direct attribution
To identify the amount of the residual input tax, the input tax which is either recoverable
or non-recoverable in full has to be excluded. Therefore, the first step is to perform the
following calculations in respect of each tax period:
3
• Calculate the total value of input tax which is directly attributable to supplies for which
VAT may be recovered under Article 54(1) of the Decree-Law. (“Fully recoverable input
tax”)
• Calculate the total value of input tax which is directly attributable to supplies for which
VAT cannot be recovered.
VAT incurred
(Input tax)
Wholly taxable
(Full recovery)
Wholly exempt
(No recovery)
Mixed/
Residual
(Partial recovery)
Note that input tax which is specifically blocked under Article 53 of the Executive
Regulation shall be excluded from this calculation.

3 Article 55(5) of the Executive Regulation.
VAT Guide | Input Tax Apportionment | VATGIT1 6
Step 2: Residual input tax
Any input tax incurred which cannot be directly attributed to the making of supplies in
respect of which input tax is wholly recoverable or wholly non-recoverable constitutes the
residual input tax of the taxable person.
Step 3: Apportionment percentage
The next step is to determine the extent to which input tax may be recovered in respect
of the residual input tax, i.e. the apportionment rate. The standard method for apportioning
the residual input tax is provided in Article 55(6) of the Executive Regulation and is
calculated as follows:
𝑎
(𝑎 + 𝑏)
×
100
1
Where:
• a = Wholly recoverable input tax
• b = Wholly non-recoverable input tax
The percentage should be rounded to the nearest whole number.4
Examples of rounding:
Recovery percentage Rounded to Nearest Whole Number
90.87 91%
61.50 62%
73.19 73%
Step 4: Recoverable input tax
The recoverable portion of the residual input tax is calculated by multiplying the total value
of residual input tax by the percentage calculated under Step 3 above.
To calculate the total recoverable input tax for the tax period, the recoverable portion of
the residual input tax shall be added to the fully recoverable input tax determined under
Step 1.

4 Article 55(6)(b) of the Executive Regulation.
VAT Guide | Input Tax Apportionment | VATGIT1 7
This calculation is required to be performed for each period in which the taxable person
incurs input tax relating to the making of exempt supplies, or to activities that are not in
the course of business.5
2.4. Input tax apportionment – Annual adjustments
Registrants are required to perform two additional calculations at the end of each tax year.
The registrant’s tax year is determined by the registration stagger and may be different
than the calendar year and the registrant’s financial year.6 If the registrant’s tax year ends
on a date other that the financial year-end, the registrant may apply for an administrative
exception to amend the stagger to align these two dates.7
The first calculation is to perform an annual washup and the second is to calculate an
actual use adjustment.
Annual washup
At the end of the registrant’s tax year, the person is required to perform an annual washup calculation as follows:
Step 1: Combine input tax recovered in returns submitted during tax year
Combine the input tax recovered during each of the tax periods forming part of that tax
year by adding boxes 9 and 10 of all the relevant tax returns submitted together.
Step 2: Recalculate recoverable input tax
Recalculate recoverable input tax for the tax year as if it was a single tax period.8 The
same principles (i.e., direct attribution and residual input tax) apply as in step 1 of section
2.3. Note that the amount of the residual input tax should remain the same, but the
apportionment percentage for this calculation may vary as the intention is to smoothen
the percentage by removing, for example, seasonal fluctuations.

5 Article 55(7) of the Executive Regulation.
6 Refer to the VAT User Guide | Returns for more information on registration staggers and the related tax
year ends.
7 Refer to the VAT Administrative Exceptions VAT Guide | VATGEX1 for more information.
8 Article 55(8) of the Executive Regulation.
VAT Guide | Input Tax Apportionment | VATGIT1 8
Step 3: Calculate annual washup adjustment
Deduct the total recoverable input tax calculated in step 1 from the amount calculated in
step 2 to calculate the annual washup adjustment.
Example
Company A, a registrant, makes both taxable and exempt supplies. Input tax was incurred
to make both wholly taxable supplies and wholly exempt supplies, and for mixed purposes
(residual VAT).
Tax year Wholly recoverable input tax Wholly non-recoverable
input tax
Residual input
tax
Quarter 1 2,000,000 3,000,000 10,000,000
Quarter 2 3,000,000 3,000,000 12,000,000
Quarter 3 3,000,000 3,000,000 8,000,000
Quarter 4 1,000,000 9,000,000 5,000,000
Total 9,000,000 18,000,000 35,000,000
The recoverable input tax per the VAT returns is as follows:
The total residual input tax recovered per the VAT returns submitted for the calendar year
is AED 14,500,000.9

9 4,000,000 (Q1) + 6,000,000 (Q2) + 4,000,000 (Q3) + 500,000 (Q4).
VAT Guide | Input Tax Apportionment | VATGIT1 9
Full tax year Input tax Recoverable
input tax
Total recovery
Wholly recoverable input tax 9,000,000 100% 9,000,000.00
Wholly non-recoverable input tax 18,000,000 - -
Residual input tax 35,000,000 33% 11,550,000
Based on the above, the annual washup adjustment is calculated as the difference
between the recoverable residual input tax per the returns submitted (AED 14,500,000)
and the recoverable residual input tax per the annual calculation (AED 11,550,000), i.e.,
AED 2,950,000. In this case an excess amount of input tax was recovered via the VAT
returns.
Actual use adjustment
After performing the annual washup calculation, the registrant is required to calculate the
difference between the recoverable input tax per the annual washup calculation and the
input tax which would be recoverable if an apportionment ratio which reflects the actual
use of the goods and services to which the input tax relates was used.
The registrant is only required to make an actual use adjustment if the difference between
these amounts is more than AED 250,000.
10 For example,
Recoverable residual input tax
Variance Actual use adjustment
required Per annual washup calculation Per actual use
900,000 500,000 400,000 Yes
900,000 750,000 150,000 No
900,000 1,200,000 (300,000) Yes
900,000 1,000,000 (100,000) No
It should be noted, that the method to determine the “actual use” must be one of the
special apportionment methods described in this Guide, taking into account the guidelines
on which special methods can be used by which types of businesses.

10 Article 55(10) of the Executive Regulation.
VAT Guide | Input Tax Apportionment | VATGIT1 10
Example – continued
Assuming Company A is a small retail bank which used the output-based method for the
purposes of determining whether an actual use adjustment is required and it made the
following supplies during its tax year:
• Taxable supplies: AED 40,000,000
• Exempt supplies: AED 360,000,000
• Residual input tax per annual washup calculation: AED 35,000,000
• Recoverable residual input tax per annual washup calculation: AED 11,550,000
Step 1 – Calculate recoverable residual input tax based on the alternative special method
The residual input tax recovery rate, using the outputs-based method11 is calculated as
follows:
𝑇𝑎𝑥𝑎𝑏𝑙𝑒 𝑠𝑢𝑝𝑝𝑙𝑖𝑒𝑠 (40,000,000)
𝑇𝑎𝑥𝑎𝑏𝑙𝑒 𝑠𝑢𝑝𝑝𝑙𝑖𝑒𝑠 (40,000,000) + 𝑒𝑥𝑒𝑚𝑝𝑡 𝑠𝑢𝑝𝑝𝑙𝑖𝑒𝑠 (360,000,000)
×
100
1
= 10%
The recoverable residual input tax under this method is AED 35,000,000 x 10% =
AED 3,500,000.
Step 2 – Calculate the difference between recoverable residual input tax per the annual
washup and actual use
Recoverable residual input tax per annual washup (AED 11,550,000) less recoverable
residual input tax per actual use calculation (AED 3,500,000) = AED 8,050,000.
Step 3 – Determine whether an actual use adjustment is required
Since the variance calculated in step 2 is more than AED 250,000, Company A is required
to make an actual use adjustment.
Step 4 – Calculate the total year-end adjustment related to recoverable residual input tax

11 For more information on this special input tax apportionment method, refer to Section 3.1.
VAT Guide | Input Tax Apportionment | VATGIT1 11
Company A is required to reduce its input tax recovery by the following in the adjustments’
column in its first VAT return of the following tax year:
Annual washup adjustment: AED 2,950,000
Actual use adjustment: AED 8,050,000
Total AED 11,000,000
Alternative input tax apportionment methods
The FTA accepts that the standard method of input tax apportionment may not be
appropriate for the particular situation of every registrant. Each business is different, and
the standard method of apportionment may give rise to outcomes that do not reflect the
actual use of goods or services by the business. In such cases, registrants may apply for
an alternative method of input tax apportionment to be used.
12 If a special input tax
apportionment method is approved by the FTA, the registrant shall apply the approved
method from the first tax period following the tax period in which the approval was granted
by the FTA.13
The special input tax apportionment methods which are available to registrants are:
• Outputs-based method;
• Transaction count method;
• Floorspace method and
• Sectoral method.
Not every special input tax apportionment method will be available to every business.
Instead, specific special input tax apportionment methods will generally be available only
to businesses from certain industry sectors.
Chapter 3 of this Guide provides guidance on each of the alternative input tax
apportionment methods, and the types of businesses which may apply with FTA to use
them.
Where a special method is approved, it will be applied for each tax period following the
date of approval as well as for the annual wash-up adjustment in the first tax period of the
following tax year. Furthermore, on the basis that the special method is based on actual
use, no actual use adjustment will be required in respect of tax years following the
approval as long as the FTA approval remains valid. The approval will typically be granted

12 Article 55(11) of the Executive Regulation.
13 Article 55(12) of the Executive Regulation.
VAT Guide | Input Tax Apportionment | VATGIT1 12
for 4 years in the in the case of a non-sectoral method and for 2 years in the case of the
sectoral method.
VAT Guide | Input Tax Apportionment | VATGIT1 13
3. Special Apportionment Methods
3.1. Outputs-based method
3.1.1. How does it work?
The outputs-based method determines the apportionment percentage for residual input
tax on the basis of the types of supplies made by the taxable person.
To calculate the recovery ratio under this method, the registrant needs to identify the
value of taxable supplies as a proportion of all supplies made by the taxable person.
𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑡𝑎𝑥𝑎𝑏𝑙𝑒 𝑠𝑢𝑝𝑝𝑙𝑖𝑒𝑠
𝑇𝑜𝑡𝑎𝑙 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 𝑠𝑢𝑝𝑝𝑙𝑖𝑒𝑠 ×
100
1
This method is appropriate where the VAT incurred by a business is mostly directly linked
to income earned, i.e. where there is a strong correlation between income and expenses.
3.1.2. Who is the method available to?
The outputs-based method is available for companies engaged in the following sectors:
• Insurance companies (Islamic and non-Islamic)
• Financial institutions, such as banks that provide banking services to individuals,
companies, large establishments and investment banks, and similar institutions
(Islamic and non-Islamic)
• Providers of local passenger transportation services
• Educational institutions
• Establishments, such as art galleries, cultural entities, and similar establishments, that
conduct non-business activities
3.2. Transaction Count method
3.2.1. How does it work?
The transactions count method determines the apportionment percentage based on the
number of taxable transactions as a proportion of all transactions carried out by the
business during the period.
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑡𝑎𝑥𝑎𝑏𝑙𝑒 𝑡𝑟𝑎𝑛𝑠𝑎𝑐𝑡𝑖𝑜𝑛𝑠
𝑇𝑜𝑡𝑎𝑙 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑡𝑟𝑎𝑛𝑠𝑎𝑐𝑡𝑖𝑜𝑛𝑠
×
100
1
VAT Guide | Input Tax Apportionment | VATGIT1 14
The transaction count method is used when the VAT on expenses incurred by the
business is most directly linked to the number of transactions (i.e. supplies made) rather
than the amount of income earned – that is, where the level of expense would be similar
regardless of the value of the supplies being made. This method will only be appropriate
if the nature of the transactions is such that each transaction is either wholly taxable or
wholly exempt. Any transactions with both taxable and exempt components should be
excluded from the calculation. In order to use this method, the registrant is required to
accurately define the type of transactions as well as the related tax treatment in order to
provide a clear audit trail to support the apportionment calculation. The registrant is,
therefore, required to ensure that their accounting or management system is able to
identify and track the different types of transactions.
3.2.2. Who is this method available to?
The transaction count method is available to financial institutions, such as banks (Islamic
and non-Islamic), that provide banking services to companies, large establishments and
investment banks, and similar institutions.
3.3. Floorspace method
3.3.1. How does it work?
The floorspace method determines the apportionment percentage for residual input tax
by identifying the proportion of the floorspace used for taxable activities as a percentage
of the total floorspace used by the business, excluding areas used for both taxable and
non-taxable purposes.
𝐹𝑙𝑜𝑜𝑟𝑠𝑝𝑎𝑐𝑒 𝑓𝑜𝑟 𝑚𝑎𝑘𝑖𝑛𝑔 𝑡𝑎𝑥𝑎𝑏𝑙𝑒 𝑠𝑢𝑝𝑝𝑙𝑖𝑒𝑠
𝑇𝑜𝑡𝑎𝑙 𝑓𝑙𝑜𝑜𝑟𝑠𝑝𝑎𝑐𝑒 ×
100
1
The measuring unit used for the nominator and denominator should be consistent, e.g. if
using m2
for nominator, m2 should also be used for denominator.
The floorspace method is used when it is possible to identify whether a specific area is
used for a taxable or non-taxable/exempt activity.
VAT Guide | Input Tax Apportionment | VATGIT1 15
3.3.2. Who is this method available to?
The floorspace method is available to landlords and businesses dealing with supplies
(sales and rental) of commercial and residential properties, including real estate
companies and other businesses selling or renting out real estate on an ongoing basis,
where expenses would be similar for floorspace regardless of whether used for making
non-taxable/exempt or taxable supplies.
3.4. Sectoral method
3.4.1. How does it work?
Large complex businesses may conduct different business activities through different
divisions which are independent of each other from an operational and accounting
perspective. For example, a bank may have different divisions dealing with retail
customers and investment banking; or an insurance company may, in addition to its core
business, have a real estate division which deals with renting out properties.
Where such business activities are conducted through distinct divisions of a single entity,
and different expenses relate to activities of these divisions, none of the special
apportionment methods may be suitable for apportioning input tax for the business as a
whole. To ensure that the apportionment method is as tailored as possible for each of the
distinct business divisions, such businesses may apply for a “sectoral” method of input
tax apportionment.
In addition to being used for different divisions of the same entity, this method can also
be used by different entities which are members of the same tax group – e.g. where a
single type of input tax apportionment method is not appropriate for all members of the
group.
Application of the sectoral method involves the following steps:
• Firstly, the taxable person must identify the residual input tax in accordance with the
general rules in Article 55 of the Executive Regulations as described in this Guide.
• Secondly, any residual input tax which relates wholly to a particular sector (i.e. division
or entity) is allocated wholly to that sector.
• Thirdly, the remaining residual input tax which relates to more than one sector is
divided between those sectors in accordance with an appropriate allocation method
(discussed below).
• Finally, each of the sectors will be assigned an own input tax apportionment method
appropriate for that specific sector (e.g. either the standard input tax apportionment
method, outputs-based method, transactions count method or floorspace method).
VAT Guide | Input Tax Apportionment | VATGIT1 16
This assigned method would then be used by the sector to apportion the residual input
tax relating to that sector.
3.4.2. Sector allocation methods
Where residual input tax of the business relates to multiple sectors of that business, it is
necessary to allocate the input tax to these individual sectors. There are two methods
which can be used for such an allocation:
• Headcount method
• Outputs method
Headcount method
The headcount method is used when overhead expenses incurred are in closest relation
to the number of employees, i.e. if the expenses are linked to employees. For example,
an insurance company may have different employees solely working in its (distinct) life
and general insurance divisions, respectively.
The headcount method uses the full-time equivalent (FTE) of staff (usually income
generating only, not back office) employed or used in each sector. In instances where
employees work in more than one department/division/unit, the staff numbers shall be
measured on a FTE basis.
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝐹𝑇𝐸 𝑚𝑒𝑚𝑏𝑒𝑟𝑠 𝑖𝑛 𝑡ℎ𝑒 𝑟𝑒𝑙𝑒𝑣𝑎𝑛𝑡 𝑠𝑒𝑐𝑡𝑜𝑟
𝑇𝑜𝑡𝑎𝑙 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝐹𝑇𝐸
×
100
1
Outputs method
The outputs method is best used where expenses are linked to income. The amount of
income in the sector may therefore be reflective of the input tax on expenses.
The allocation under this method is done using the following formula:
𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑠𝑒𝑐𝑡𝑜𝑟
′
𝑠 𝑠𝑢𝑝𝑝𝑙𝑖𝑒𝑠
𝑇𝑜𝑡𝑎𝑙 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 𝑠𝑢𝑝𝑝𝑙𝑖𝑒𝑠 ×
100
1
This method can be appropriate for a wide-range of entities in both private and not-forprofit sectors. It may not be appropriate, however, where the business has a mixture of
well-established sectors and sectors in a start-up phase, as the expectation would be that
the start-up divisions would have proportionally more expenses than income.
VAT Guide | Input Tax Apportionment | VATGIT1 17
3.4.3. Who is this method available to?
It is expected that sectoral methods will be used by large, complex companies and
establishments with different divisions, such as:
• banks with retail, investment and real estate divisions, and similar institutions;
• insurance companies providing both life and non-life insurance; and
• real estate companies that have separate divisions for commercial and residential
properties.
VAT Guide | Input Tax Apportionment | VATGIT1 18
4. Applying for a special input tax apportionment method
4.1. How does it work?
A registrant may apply to the FTA for permission to use a special method of input tax
apportionment for the first time if the registrant has used the standard apportionment
method for at least 6 months and this method does not yield a fair and reasonable result.
As part of the application to use a special input tax apportionment method, the registrant
is required to identify which method it is applying for, and provide evidence that the special
method of apportionment will be more appropriate than the standard method.
If the FTA approves the use of a special apportionment method, the taxpayer will typically
be required to continue to use the approved method for at least 2 years.
4.2. Who may apply for a special input tax apportionment method?
To be eligible to apply for the special method of input tax apportionment, all of the
following conditions must be met:
• the applicant has been registered for VAT for at least 6 months;
• the applicant makes both taxable supplies and exempt supplies/conducts non-taxable
activities; and
• the standard method of input tax apportionment does not give a fair and reasonable
result for the input tax recovery of the applicant.
4.3. Who can submit the application?
Generally, the Input Tax Apportionment Request Form should be submitted by the person
seeking to use the special apportionment method (i.e. by the “applicant”). Where an
application is submitted on behalf of a tax group, or for a member of a tax group, the
request should be submitted by the representative member of that tax group. If the special
apportionment method is approved, it shall apply to the whole tax group as the tax group
is considered to be one and the same person from a VAT perspective.
The applicant must submit the Input Tax Apportionment Request Form via the concerned
person’s Emaratax portal on the FTA’s website. Submissions will also be accepted where
they are submitted on behalf of the applicant by either of the following:
• The appointed tax agent; or
• The appointed legal representative.
VAT Guide | Input Tax Apportionment | VATGIT1 19
Please refer to the relevant Emaratax guide for more information on the process to submit
the application.
4.4. Which special input tax apportionment methods to apply for?
Most applicants will be limited in respect of the types of special methods for which they
can apply. Where a business is engaged in a single predominant exempt activity,
depending on the type of the activity, the business is able to choose either from the
outputs-based method, the transactions count method or the floorspace method for the
input tax apportionment. In contrast, where a business is engaged in a number of different
types of exempt activities through distinct divisions, the business is able to apply for a
sectoral method of apportionment.
Please refer to the diagram on the following page to determine which apportionment
methods are available to different types of businesses. The FTA will reject applications
where the applicant has applied for a special input tax apportionment method which is not
applicable to its specific type of business (as outlined under Chapter 3 of this Guide).
VAT Guide | Input Tax Apportionment | VATGIT1 20
Special apportionment methods – Eligible activities
VAT Guide | Input Tax Apportionment | VATGIT1 21
5. Input Tax Apportionment Request Form
5.1. What information will you need when completing the Request Form?
The applicant is required to provide the following information as part of the request for
approval to use a special apportionment method for determining the recovery rate in
respect of residual input tax relating to tax periods:
• A detailed description of the business activities of the applicant.
• 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 as provided in Article 55 of the Executive
Regulations. The calculations should be for the period of 12 months preceding the
application (as applicable). As an exception, if the business has not conducted
business activities for at least 12 months, the calculations may be based on such
shorter period.
• Calculations of the residual input tax apportionment in Excel format for the same period
as above but using the special method for which the applicant is applying, and an
alternative method if applicable.
Where the application is made for a sectoral method, the applicant must provide the
special apportionment method calculations for each of the sectors for which the
application is made as well as a description of each of the sectors.
The historical and expected calculations of residual input tax apportionment must use the
real figures of the business for the relevant period of 12 months (where it is applicable).
These amounts should agree to the amounts reflected in the registrant’s tax returns
submitted during the tax year. If there are any discrepancies, reasons for the variances
have to be provided to the FTA.
As part of the calculations, the applicant should provide information substantiating the
figures which are used to perform apportionment calculations for both the standard
method and the chosen special method(s). For example, if the calculation indicates that
the applicant made a certain amount of exempt supplies in a 12-month period, the
applicant should provide a list of these exempt supplies.
Please refer to Appendix 1 for details regarding the Input Tax Apportionment Request
Form.
VAT Guide | Input Tax Apportionment | VATGIT1 22
5.2. Submitting the Input Tax Apportionment Request Form
Please refer to the relevant Emaratax guide for more information on the process to submit
the form.
5.3. FTA’s decision in respect of the application
Once the request is accepted, the FTA may require up to 40 business days from the
date the request was received, to respond to the initial input tax apportionment request if
a non-sectoral method is selected, and up to 60 business days if a sectoral method is
selected.
If additional information is required in respect of the lodged application, the FTA will
request the additional information. It may take the FTA a further 40 or 60 business days
(based on the method selected in the application) to respond to the updated request for
a special input tax apportionment method.
The decision of the FTA to approve (or reject) the use a special method is based solely
on the information provided by the applicant as part of the application process. The
applicant will be notified of the FTA’s decision in a decision delivered via an email.
Where the FTA has approved the use of a special input tax apportionment method, the
approved method may be used from the first tax period following the date of approval, or
any other date as decided by the FTA.
The approval will typically be granted for 4 years in the in the case of a non-sectoral
method and for 2 years in the case of the sectoral method. Applicants cannot apply to
change the approved method for at least 2 years following the approval (subject to the
notification rules described in Section 5.4 below).
Note: The FTA may withdraw the approval to use a special input tax apportionment
method at any time – for example, if it considers that that the method does not provide an
accurate result or where such withdrawal is necessary for the protection of public
revenues. During the period of approval, the FTA may request from the taxable person
such information as the FTA believes is necessary in order to make a decision regarding
whether the ongoing use of the approved method is still appropriate or not.
5.4. Notifications relating to change in business
Although a business is generally not able to apply to change the approved special method
for at least 2 years following the approval, it is required to notify the FTA where the
result produced over the full tax year by the input tax apportionment method approved
VAT Guide | Input Tax Apportionment | VATGIT1 23
by the FTA differs by more than 10% from the result the method generated at the time of
application.
The applicant may submit the notification form via the concerned person’s Emaratax
portal on the FTA’s website.
Following the notification, the FTA will consider whether the approved method is still
suitable for the business. Where the approved method is not considered suitable anymore,
the FTA may require the business to submit a new special method application in order to
be able to continue using the same, or apply an alternative special method of input tax
apportionment.
5.5. When to re-apply?
As mentioned above, any method approved by the FTA is valid for 2 or 4 years, depending
on the method. If the registrant wants to continue using a special method after the
expiration of the period, a new application is encouraged to submit the application to the
FTA at least 40 business days before the expiry of the most recent approved special
method. 14 Provided the taxable person submitted a request to continue using the
previously approved special method before its expiry date, the registrant may continue
using the previously approved method up to the end of the tax period during which a new
decision on the request is issued by the FTA.
In case of any major changes in the business, the nature of the supplies and / or expense
allocation principles, between the time of the original application data and the new
application, such changes should be highlighted to the FTA in the new request.
The new application shall include the same type of information and calculations as
the original application, for a period of 12 months preceding the new application.
In addition to the above, the new application shall contain a comparative overview of the
recovery rates and sectors (where applicable) provided in the original application and in
the new apportionment calculation requested, with an explanation of any major fluctuation
in the recovery rates.

14 Refer to Section 5.3 above for the timeline regarding the FTA’s responses to the application.
VAT Guide | Input Tax Apportionment | VATGIT1 24
6. Updates and Amendments
Date of amendment Amendments made
December 2019
• Applicants will now be required to submit calculations for a
minimum period of 12 months preceding the application where it
is applicable (revised in several sections);
• Appendix 2 has been revised to include new line items and
figures;
• Added Appendix 3 that includes a Common Errors section.
March 2023
• Updated the guide to be more user friendly by including additional
examples and simplified explanations;
• Section 4.4 was updated to specify that persons supplying
educational services as well as persons conducting non-business
activities may apply to use the output-based special
apportionment method;
• Section 5.4 was added to provide guidance on how, and when a
registrant can re-apply to continue using a special method after
the expiration of the approval to use a specific special
apportionment method;
• Appendix 2 has been revised to include examples of the input tax
apportionment calculation for each special method;
• Appendix 3 that lists common errors made by taxpayers when
applying for the special method application was updated.
June 2023
• Updated the procedures for filing applications and notifications
through the Emaratax portal on the FTA’s website.
VAT Guide | Input Tax Apportionment | VATGIT1 25
Appendix 1: Completing the Application Form
The form must be completed electronically via the concerned person’s Emaratax portal
on the FTA’s website.
The following guidance is designed to help understanding the questions in the Input Tax
Apportionment Request Form in order to complete the form accurately. Please refer to
the relevant Emaratax guide for more information on the process to submit the form.
1. About the Applicant
Note that this section will be prepopulated based on the registrant’s taxpayer
record.
Tax Registration Number (TRN) Please review the prepopulated data.
Name of the Applicant
(English)
Please review the prepopulated data.
Name of the Applicant (Arabic) Please review the prepopulated data.
Tax Agent Approval Number (TAAN)
(if submitted by a Tax Agent)
If the request is submitted by a tax agent on behalf
of a client, the TAAN will be prepopulated based
on the tax agent’s profile.
2. Business Activity Details
What is the special method that you
wish to apply?
Please select from the drop-down list including:
- Sectoral Method
- Non-Sectoral Method
Upload the calculation sheet
applying the standard method for a
period of 12 months preceding the
application
Attach the standard method calculations in Excel
format for a period of 12 months preceding the
application (where it is applicable).
The calculations should be done for each tax
period separately and also consolidated for the
entire 12-month period (where it is applicable).
Furthermore, please use Excel formulae when
making the calculations.
VAT Guide | Input Tax Apportionment | VATGIT1 26
Specify the start and end dates to
which the calculation of the
standard method relates
Please select the start and end dates which
correspond to the calculation sheet.
Please confirm what industry your
business is in
This field is prepopulated based on the registrant’s
taxpayer record.
Explain why you are requesting a
special input tax apportionment
method
Please provide description of why you are seeking
a special method.
Provide description of exempt
supplies you make
Provide a description of each type of exempt supply
that the business makes.
Provide description of taxable
supplies you make
Provide a description of each type of taxable supply
(taxed at 5% and 0%) that the business makes.
Provide description of nonbusiness activities conducted by
the business
Provide a description of the non-business activities.
Provide information on expenses
wholly attributable to exempt
supplies / non-business activities
Provide information on the expenses which are
wholly attributable to exempt supplies / nonbusiness activities.
Provide information on expenses
wholly attributable to taxable
supplies
Provide information on expenses which are wholly
attributable to taxable supplies.
Provide information on residual
input tax
Provide a description of the types of expenses that
are incurred to make both taxable and non-taxable
supplies, i.e. expenses that cannot be attributed to
the making of wholly taxable, or wholly non-taxable
supplies.
3. Request Details
VAT Guide | Input Tax Apportionment | VATGIT1 27
Please identify the alternative
apportionment method
Select from the drop down list the special method
that applies to the applicant – the list is different
based on the selection made in Step 2.
Complete the below section if you have selected a non-sectoral method:
Please Identify the alternative
apportionment method
Select from the drop-down menu
Provide a clear justification for the
method selected.
Provide explanation using the flowchart under
Section 4.4 of this Guide, to determine the
appropriate special input tax apportionment
method.
Upload the calculation sheet
applying the proposed method for
a period of 12 months preceding
the application
Upload the calculation sheet applying the proposed
method for the same period as the example of the
standard method of apportionment provided above.
The calculations must be provided in Excel format.
Provide any documentary proof to
support the calculations made for
the proposed and any other
alternative methods
Attach the relevant supporting documents to
facilitate the processing of the request. Information
that is commercially sensitive can be redacted.
Complete the below section if you have selected a sectoral method:
Identify the method for allocating
expenses between sectors
Please select from the drop down list the allocation
method that applies:
• Headcount method
• Outputs method
Justification for selecting a
sectoral method and the
alternative methods for each
sector
Provide reasons for selecting the sectoral method
and the alternative methods for each sector.
VAT Guide | Input Tax Apportionment | VATGIT1 28
Identify the special apportionment
methods selected to be used for
each sector
Select from the list the sectors and the special
apportionment methods selected for each of the
sectors.
Upload the calculation sheet
applying the proposed method for
a period of 12 months preceding
the application
Upload the calculation sheet applying the proposed
method for the same period as the example of the
standard method of apportionment provided above.
The calculations must be provided in an excel
format.
Provide any documentary proof to
support the calculations made for
the proposed and any other
alternative methods
Attach any supporting documents deemed relevant
to facilitate the processing of the request.
Information that is commercially sensitive can be
redacted.
4. Declaration and Authorized signatory
Authorized Signatory details Please review the prepopulated data.
Declaration:
1) I have answered all questions correctly to the best of my knowledge.
2) I have provided supporting information as required.
3) I have considered the tax laws and regulations applicable to the subject of this
input tax apportionment, as well as previous input tax apportionment requests
(where applicable).
4) I will inform the FTA if any changes occur to my business that would affect my
eligibility to apply for or use a specific input tax apportionment method.
5) I agree to provide additional information which may be requested by the FTA when
reviewing this input tax apportionment application.
Confirm the declaration
VAT Guide | Input Tax Apportionment | VATGIT1 29
5. Review
Review the whole ITA application and confirm that you have read and reviewed all
details related to the application.
In case all details are correct proceed with submitting the application.
VAT Guide | Input Tax Apportionment | VATGIT1 30
Appendix 2: Example on input tax apportionment
Please note that below are examples only and may not be suitable for, or may need to
be adapted for specific cases.
Standard – Input based method
Standard (Input based) method calculation AED
Total input tax (Consolidated data for the whole tax year) XX
Input tax attributable to making taxable supplies (Standard rated + zero-rated
supplies) - Fully recoverable XX
Input tax attributable to making exempt supplies - Non-recoverable XX
Input tax blocked from recovery in line with the Article 53 of the Executive
Regulation XX
Total residual input tax - Partially recoverable XX
Recovery percentage as per Standard (Inputs based) method: X%
Recoverable residual input VAT XX
Non-recoverable residual input tax: XX
Total recoverable input VAT for the period (Fully recoverable input VAT +
Residual recoverable input VAT)
-
Total recovered input VAT as per the submitted VAT returns -
VAT Guide | Input Tax Apportionment | VATGIT1 31
Outputs-based method
Actual use calculation - Outputs-based method AED
Total input tax (Consolidated data for the whole tax year) XX
Fully recoverable input tax: XX
Non-recoverable input tax XX
Total residual input tax
XX
Special Method:
Total taxable supplies XX
• Total standard-rated supplies XX
• Total zero-rated supplies XX
Total exempt supplies XX
Total non-business income XX
Recovery percentage as per Outputs-based method: X%
Recoverable residual input tax - Outputs-based method: XX
Non-recoverable residual input tax: XX
Total recoverable Input VAT per the Actual use calculation (Fully
recoverable input VAT + Residual recoverable input VAT): -
Transaction count method
Actual use calculation - Transaction count method AED
Total input tax (Consolidated data for the whole tax year) XX
Fully recoverable input tax: XX
Non-recoverable input tax XX
Total residual input tax XX
Special Method:
Number of taxable transactions XX
Total number of transactions XX
Recovery percentage as per Transactions count method: X%
Recoverable residual input tax - Transactions count method: XX
Non-recoverable residual input tax: XX
Total recoverable Input VAT per the Actual use calculation (Fully
recoverable input VAT + Residual recoverable input VAT): -
VAT Guide | Input Tax Apportionment | VATGIT1 32
Floorspace method
Actual use calculation - Floorspace method AED
Total input tax (Consolidated data for the whole tax year) XX
Fully recoverable input tax: XX
Non-recoverable input tax XX
Total residual input tax XX
Special Method:
Total amount of floorspace (sqm) used by taxpayer XX
Floorspace (sqm) used for making taxable supplies XX
Floorspace (sqm) used for making exempt supplies XX
Communal areas (sqm) XX
Floorspace (sqm) used for making both taxable and exempt supplies XX
Recovery percentage as per Floorspace method: X%
Recoverable residual input tax - Floorspace method: XX
Non-recoverable residual input tax: XX
Total recoverable Input VAT per the Actual use calculation (Fully
recoverable input VAT + Residual recoverable input VAT): -
VAT Guide | Input Tax Apportionment | VATGIT1 33
Sectoral method
Tax period covered: Tax period covered:
Method selected: Method selected:
Description: Amount (AED) VAT (AED) Description: Amount (AED) VAT (AED)
Total value of the Input VAT for the period: Total value of the Input VAT for the period:
a . Input tax wholly attributable to making
standard rated supplies:
a . Input tax wholly attributable to making
standard rated supplies:
b . Input tax wholly attributable to making zero
rated supplies:
b . Input tax wholly attributable to making zero
rated supplies:
Input tax wholly attributable to making taxable
supplies (a. + b.):
Input tax wholly attributable to making taxable
supplies (a. + b.):
Input tax wholly attributable to making exempt
supplies:
Input tax wholly attributable to making exempt
supplies:
Total value of the overheads / residual Input
tax:
Total value of the overheads / residual Input
tax:
Sector allocation – directly attributable
overheads / residual Input tax: Amount (AED) VAT (AED) Sector allocation – directly attributable
overheads / residual Input tax: Amount (AED) VAT (AED)
Sector I: Sector I:
Sector II: Sector II:
Sector III: Sector III:
Sector IV: Sector IV:
Sector V: Sector V:
Remaining unallocated Input tax overheads /
residual Input tax:
Remaining unallocated Input tax overheads /
residual Input tax:
Overheads / residual input tax allocation
method:
Overheads / residual input tax allocation
method:
Explanation on why certain allocation method
has been selected (e.g. make sure to provide
headcount overview):
Explanation on why certain allocation method
has been selected (e.g. make sure to provide
headcount overview):
Application of the sector allocation
methodology on the overheads / residual input
tax allocation to sectors:
Amount (AED) VAT (AED)
Application of the sector allocation
methodology on the overheads / residual input
tax allocation to sectors:
Amount (AED) VAT (AED)
Sector I: Sector I:
Sector II: Sector II:
Sector III: Sector III:
Sector IV: Sector IV:
Sector V: Sector V:
Sector I: Sector I:
Sector II: Sector II:
Sector III: Sector III:
Sector IV: Sector IV:
Sector V: Sector V:
Sector Input tax - recovery percentage Recoverable Input tax for the period Sector Input tax - recovery percentage Recoverable Input tax for the period
Sector I: Sector I:
Sector II: Sector II:
Sector III: Sector III:
Sector IV: Sector IV:
Sector V: Sector V:
Consolidated - Sector Input tax recovery Consolidated - Sector Input tax recovery
New application - Special method application
1 July 2021 - 30 June 2022
Sectoral
Headcount or Outputs method
Consolidated - Sector allocation on the overheads / residual input tax:
Original - Special method application
Headcount or Outputs method
Consolidated - Sector allocation on the overheads / residual input tax:
1 July 2019 - 30 June 2020
Sectoral
VAT Guide | Input Tax Apportionment | VATGIT1 34
Sectors:
Recovery rate as per the
previously approved special
method
Recovery rate as per the new
special method application
Comments on the major
differences between the recovery
rates
Sector I:
Sector II:
Sector III:
Sector IV:
Sector V:
Comparative overview of the special method application
VAT Guide | Input Tax Apportionment | VATGIT1 35
Appendix 3: Common Errors
From the Input tax apportionment special method requests received, the FTA has
identified errors that are common across applications. The below checklist can assist
applicants to avoid submitting incomplete or wrong application form and supporting
documents:
General checks that apply to applicants for all methods:
• Provide a stamped / signed letter by the authorized signatory confirming the request
to apply for the special method.
• Submit the standard method and the proposed method calculations in Excel format
for a period of 12 months preceding the application (where it is applicable), as per
Section 5.1 of the Input Tax Apportionment Guide. The calculations should be done
for each Tax period separately and also consolidated for the entire 12-month period
(where it is applicable). Furthermore, please use Excel formulae when making the
calculations.
• Ensure that the recovery rate percentages are rounded to the nearest whole number
in accordance with Article 55(6) of the Executive Regulation.
• Clearly state in the calculations if there are expenses that are wholly attributable to
either exempt or taxable supplies or if all expenses are residual. This also applies to
expenses which are subject to the reverse charge mechanism.
• Make sure that there are no deviations between the calculations provided and the
submitted returns. If there are deviations, these should be clearly explained.
Standard method
• Exclude blocked input tax from the standard method calculations.
Outputs-based method
• Exclude expenses which are subject to the reverse charge mechanism from the
outputs-based method calculations. These expenses are inputs, not outputs.
Transaction count method
• Exclude input transactions (including the reverse charge mechanism expenses) when
performing the transaction count method calculations.
Floorspace method
• Exclude communal areas such as lobbies and lifts when calculating the floorspace
available for commercial or residential use.
VAT Guide | Input Tax Apportionment | VATGIT1 36
Sectoral method
• Allocations:
o State the methodology used on which residual input tax has been allocated across
different sectors.
o If the headcount method is the chosen allocation method, provide a breakdown of
your total headcount. This should show your total front and back office staff as well
as any contracted personnel, even if not all of these staff are used in the headcount
allocation calculations.
• Sectors:
o Provide detailed information on the activities performed by each sector.
o Attach the calculations showing how the recoverability percentage for each sector
has been derived.
o Include the apportionment methods used for each sector along with the rationale for
using each method.