In March 2023, UAE Federal Tax Authorities (“FTA”) have published the Value Added Tax (“VAT”) guide on Input Tax Apportionment (the “Guide”) in accordance with the UAE Federal Decree-Law No. 8 of 2017 on VAT and its amendments (the “UAE VAT Law”) and the UAE Cabinet of Ministers’ Decision No. 52 of 2017 on The Executive Regulation of the Federal Decree-Law No. 8 of 2017 on VAT and its amendments (the “UAE VAT Executive Regulations”).

The Guide 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. It replaces the ‘Input Tax Apportionment: Special Method’ guide published in December 2019, as it:

  • extends the scope of sectors that can apply to use the outputs-based special apportionment method and the sectoral special apportionment method;
  • clarifies the date on which the VAT registrant can apply to use a special apportionment method for the first time;
  • clarifies the effective date of application of the special method as approved by FTA; and
  • clarifies the requirements for the re-application for a special apportionment method. 

Summary of the key updates to the Input Tax Apportionemnt Guide


Extended scope - outputs based special apportionment method

  • The outputs-based method was previously 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.
  • As an extension to the scope of sectors that can apply to use the outputs-based special apportionment method, the following sectors have been added:
    • Educational institutions.
    • Establishments, such as art galleries, cultural entities, and similar establishments, that conduct non-business activities.

Extended scope -sectoral special apportionment method

  • Large complex businesses may conduct different business activities through different divisions which are independent of each other from an operational and accounting perspective.  
  • 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.
  • There are two methods which can be used for such an allocation:
    • Headcount method
    • Outputs method
  • It was previously suggested that the sectoral method was to 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.
    • As an extension to the scope of sectors that can apply to use the sectoral special apportionment method, the following sector has been added:
      • Real estate companies that have separate divisions for commercial and residential properties.

Timeline for applying for a special apportionment method

  • A VAT 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.


FTA review timelines

  • Once the Input Tax Apportionment 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.

Effective date of application of the approved special method

  • 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.


Requirements for the re-applicassion for a special apportionment method. 

  • 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 be submited to the FTA at least 40 business days before the expiry of the most recent approved special method.
  • 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.


  • A comprehensive lists of examples have been added to the Guide that the taxpayers are encouraged to read and understand.
  • The examples cover the following:
    • examples on the standard apportionment method, the annual wash up adjustment and the actual use adjustment.
    • examples on the input tax apportionment calculations for each special apportionment method.


KPMG has a team of experienced tax specialists that can help you assess your current tax position, advise on the appropriate tax treatment, prepare clarification requests, or represent you in front of the FTA as registered tax agents.

We are happy to discuss your specific circumstances with you and determine the way forward should you have any questions or concerns in this regard. Please get in touch with your usual KPMG contact or any of the tax professionals below.

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