How to Claim VAT Paid on Purchase of Capital Assets in Dubai, UAE (2025 Guide)

Are you looking to maximize your input VAT recovery on capital asset purchases in Dubai or anywhere in the UAE? This in-depth guide explains the process for claiming VAT paid on capital assets, navigates UAE's Capital Asset Scheme, and highlights how One Desk Solution—Dubai's top tax, VAT, and bookkeeping service provider—can help you ensure compliance and unlock cash flow benefits.

Table of Contents

• What Is VAT and How Does It Apply to Capital Assets?
• The UAE Capital Asset Scheme: Basics and Implications
• Qualifying Criteria for Input VAT Recovery
• Step-by-Step Process to Claim VAT on Capital Assets
• Calculating Input VAT Adjustments
• Documentation and Compliance Checklist
• Common Mistakes and How to Avoid Them
• How One Desk Solution Enhances Your VAT Recovery
• FAQs on VAT and Capital Asset Purchases in the UAE

What Is VAT and How Does It Apply to Capital Assets?

Value Added Tax (VAT) is a 5% consumption tax applied to most goods and services sold in the UAE. When businesses invest in capital assets—such as property, plant and equipment—they pay VAT, which can be recovered under certain conditions.

Capital assets are high-value items purchased for long-term business use (like real estate, machinery, or vehicles). Proper VAT recovery on such investments lets companies better manage their cash flow and invest more efficiently in operations.

The UAE Capital Asset Scheme: Basics and Implications

The UAE introduced a Capital Asset Scheme (CAS) to manage VAT input recovery for large capital investments. This scheme ensures businesses only recover VAT on assets used for taxable business purposes and regulates how these assets are monitored over time.

Key Features of the Capital Asset Scheme

• Relevant for High-Value Assets: Applies to items or collective expenditures ≥AED5,000,000 (excluding VAT), with a useful life of at least 5 years (non-building assets) or 10 years (buildings/real estate).
• Annual Review Required: The VAT recovered is assessed annually to confirm continued business use. If asset use changes (e.g., switch to exempt/nontaxable use), a proportionate adjustment and reversal is made.
• Immediate Recovery with Adjustments: Businesses may recover all input VAT immediately, but must monitor and adjust recovery based on actual use in subsequent years.

Qualifying Criteria for Input VAT Recovery

Not all purchases qualify under CAS. To claim input VAT paid on capital assets, the following criteria must be met:

Criteria	Requirements/Explanation
Minimum Asset Value	≥AED5,000,000 (excluding VAT)
Useful Life	≥5 years (other assets), ≥10 years (buildings/parts of buildings)
Intended Business Use	Assets intended for 100% taxable business operations
Valid Tax Invoice	Detailed and compliant invoice from supplier
Payment Intention	Payment confirmed or intention established within 6 months of invoice
UAE VAT Registration	Business must be registered for VAT in the UAE
Input VAT Compliance	All records, bookkeeping, and reporting must be up to FTA standards

Types of Eligible Assets

• Office buildings or productive property
• Machinery and heavy equipment
• Fleet vehicles for delivery/services
• Infrastructure investments

If the asset is purchased in staged payments that together exceed AED5,000,000, the scheme still applies provided no significant breaks exist between payments.

Step-by-Step Process to Claim VAT on Capital Assets

1. Identify and Categorize Capital Assets
   • Ensure the asset's value and useful life meet the CAS threshold.
   • Gather all invoices, contracts, and payment confirmations.
2. Register for VAT in UAE (If Not Already)
   • Businesses must be VAT-registered with the Federal Tax Authority (FTA) to recover input VAT.
3. Obtain and Verify Tax Invoices
   • Ensure invoices include supplier TRN (Tax Registration Number), buyer details, asset description, date, and the VAT amount clearly.
4. Record Asset and VAT Paid in Accounting Systems
   • Use robust bookkeeping and accounting systems—such as QuickBooks Online, set up by experts like One Desk Solution—to log the asset and corresponding VAT.
5. File VAT Return with Input VAT Claim
   • On your quarterly VAT return, report the capital asset purchase and claim the full VAT as input tax.
   • If partially used for non-business/exempt purposes, calculate the eligible proportion only.
6. Annual Review and Adjustment
   • Every year, review the asset's use. If the usage changes (e.g., part is used for exempt activities), adjust the input VAT claim accordingly using the prescribed formula.
7. Submit Records and Support Documentation
   • The FTA can request documentation during audits. Ensure all records, usage logs, and annual adjustment calculations are maintained securely.

Calculating Input VAT Adjustments

Input VAT may need to be adjusted annually if your asset use shifts. Here's the practical approach:

Calculation Step	Description
Total VAT Paid	The total VAT paid at purchase for the capital asset
Asset Useful Life	For building: 10 years; Other assets: 5 years
Proportionate Use	Percentage of business vs. non-business (or taxable vs. exempt) use each year
Adjustment Formula	Amount of VAT to adjust = (Total VAT / Useful Life) × Change in use ratio

Documentation and Compliance Checklist

Staying compliant ensures maximum, risk-free VAT recovery:

• Original tax invoices
• Payment and internal approval records
• Asset use logs and business purpose justifications
• Annual asset use review notes/calculations
• Compliance with FTA return filing procedures
• Secure, organized digital and paper records

A specialist like One Desk Solution can automate, arrange, and safely manage your compliance documentation for audits.

Common Mistakes and How to Avoid Them

• Claiming VAT on ineligible assets below AED5,000,000 value
• Missing or incomplete invoices
• Incorrect classification of assets (inventory vs. capital asset)
• Not updating the asset use/status each year
• Late VAT filing or late reporting of adjustments
• Inadequate supporting documentation for FTA audits

Using professional bookkeeping and VAT consulting services reduces these risks.

Capital Asset Scheme Key Facts

Detail	Value/Rule
Minimum Asset Value	AED5,000,000 excl. VAT
Useful Life (Building)	10 years
Useful Life (Other Assets)	5 years
VAT Recovery	Allowed if asset used for taxable supplies
Adjustment Frequency	Annually during asset's useful life
Filing Authority	FTA (Federal Tax Authority)

How One Desk Solution Enhances Your VAT Recovery

As a leading tax, VAT, and bookkeeping expert service provider based in Dubai and serving the whole UAE, One Desk Solution offers:

• End-to-End Bookkeeping using the latest cloud platforms for precise records
• Expert Setup & Training on QuickBooks Online and other software
• VAT Documentation & Filing ensuring your claims are robust and compliant
• Capital Asset Scheme Consulting for complex asset purchases and structured payments
• Vendor Payment Management to streamline records and enable quicker, auditable VAT claims
• Customized Reporting for clarity on VAT recovery, asset use, and financial insights
• Audit Preparation to support FTA audits and minimize compliance risk

Over 200 clients across the UAE, US, UK, and Canada trust One Desk Solution for financial accuracy, regulatory peace of mind, and strategic guidance.

Frequently Asked Questions (FAQs)

Why Choose One Desk Solution for Your VAT and Bookkeeping Needs?

UAE VAT compliance—especially for significant investments—demands technical knowledge, vigilant documentation, and up-to-date regulatory awareness. One Desk Solution provides:

• Peace of Mind: Professional handling of regulations, reporting, and compliance.
• Expert Insights: VAT specialists with regional expertise.
• Cost Savings: Accelerated VAT recovery and maximized eligible claims.
• Business Focus: You continue growing your core business, while experts optimize your financial and tax positions.

Contact One Desk Solution today to streamline VAT, tax, and bookkeeping obligations. Let the professionals safeguard your compliance—and your capital.