The Federal Tax Authority  (“FTA”) has released Public Clarification VATP017 “Time-frame for recovering Input Tax”.  VATP017 clarifies the FTA’s position on when input tax may be recovered through the VAT return, and the recourse available to the taxable person where input tax is not recovered within the prescribed time period.
 
Recoverable input tax must be recovered in the first tax period when the two conditions
below are satisfied (referring Article 55(1) of the VAT Law):

1. The taxable person has received a tax invoice; and
2. He intends to pay the consideration for the supply before the expiration of six
   months after the agreed date for the payment of the supply.
    
   

   When the taxable person receives a tax invoice, the input tax can only be recovered in the tax period when an intention to pay is formed within a prescribed period. Some businesses have internal approval processes that must be completed before payment of an invoice.  VATP017 clarifies that the taxable person’s intention to make the payment only crystallizes when the internal invoice approval process is complete and an intention to make payment within the prescribed period is formed.
    
   Therefore, before a taxable person can recover recoverable input tax, he must hold a tax invoice and satisfy the condition that he has formed an intention to pay within the prescribed period of time.
    
   An additional requirement under Article 55(1) of the VAT Law is that input tax must be recovered in the first tax period when the two conditions above are satisfied.  Where the taxable person fails to recover the input tax in this tax period, the recoverable input tax

may be included on the tax return for the subsequent tax period.  Where the input tax is not recovered in either of the two eligible tax returns, the input tax will be out of the scope of the time for recovery through the VAT return, and will require submission of a voluntary disclosure to recover it.
 
VATP017 also clarifies the position where the taxable person has recovered the input tax on the tax return but has failed to make the payment before the expiration of six months after the agreed date of payment.  The taxable person should reduce his input tax by the unpaid amount in the tax period that corresponds to the expiry of the six month period.  This input tax will be recoverable once the taxable person has made the payment.