Situation:
A company registered for VAT is constructing a commercial office building for the purpose of leasing the units to other businesses. During the construction process, VAT in the amount of AED 500,000 was paid.
What actions must the company take?
1. Ensure VAT registration: Confirm that the company is registered for VAT with the FTA and is regularly filing VAT returns.
2. Check the intended use of the property: Determine whether the property will be used for taxable supplies (e.g., leasing office space, selling commercial property). If the building is partially used for exempt purposes (e.g., long-term residential lease), calculate the proportion used for taxable activities.
3. Gather supporting documents: Collect all relevant documents, including tax invoices from suppliers related to construction works and materials, bank statements, and payment receipts.
4. Calculate input VAT: Identify the amount of VAT eligible for recovery. If partial use applies, determine the recoverable portion based on the intended use.
5. Report in the VAT return: Include the rec...