15 July 2026 · Input Tax
Input Tax & Capital Asset Adjustments
If a cost you recovered input tax on through the VAT group is later reduced — a supplier credit note, a cancelled service, a renegotiated fee — you must repay the over-recovered input tax, and after exit that repayment goes in your own return. This side of the adjustment is easy to overlook because it works in the FTA's favour, but FTA Directive No. 2 of 2026 covers it expressly. The Capital Assets Scheme (Executive Regulation Articles 57–58) reaches further: a capital asset is a single item of expenditure of AED 5 million or more (excluding VAT), and its input tax is re-tested against actual taxable use over an adjustment period of 10 years for a building and 5 years for other capital assets. If such an asset left the group with you, the remaining annual adjustments are reported in your own return for the rest of the scheme period, based on your own taxable-use percentage each year.
Exiloz Management & Tax Consultant · Dubai-based FTA-focused advisory · VAT, corporate tax & accounting
Reduced costs mean repaid tax
Input tax recovery is not permanent. If a supplier credits a cost you deducted through the group, or a service you paid for is cancelled or renegotiated down, the input tax you over-recovered has to be repaid. After exit, that repayment is your entry, in your own return for the period the supplier credit note is received.
- Supplier credit note on a deducted cost.
- Service cancelled or renegotiated downward.
- Repay the over-recovered input tax.
- Reported in your own return after exit.
- Timed to when the credit note is received.
- Keep the supplier credit note as evidence.
The scheme follows the asset
The Capital Assets Scheme spreads input-tax recovery on big assets across their life and re-tests it each year against actual taxable use. A capital asset is a single item of expenditure of AED 5 million or more (excluding VAT); the adjustment period is 10 years for a building and 5 years for other capital assets. If you carried such an asset out of the group, the remaining annual adjustments come with it and are computed on your own taxable use.
- A capital asset is AED 5m+ (excluding VAT).
- Buildings adjust over 10 years.
- Other capital assets over 5 years.
- Each year re-tests actual taxable use.
- The asset carries its schedule to you.
- Reported in your own return each year.
A register that survives the exit
The only reliable way to keep these adjustments right is a capital-asset register that records each asset's cost, input tax recovered, scheme start, remaining years and taxable-use history. Built before exit and carried across, it tells you exactly which adjustments will land in your return and lets you evidence them if the FTA asks.
- Record cost and input tax recovered per asset.
- Note the scheme start and remaining years.
- Track taxable-use percentage year by year.
- Carry the register across at exit.
- Calculate each year's adjustment from it.
- Retain it for the full scheme period.
Related guides
Frequently Asked Questions
For input tax and capital assets.
Do I repay input tax if a cost is credited?
Yes. Over-recovered input tax must be repaid, in your own return once you have left the group, for the period you receive the supplier credit note.
How long does the Capital Assets Scheme run?
A capital asset is a single item of expenditure of AED 5 million or more (excluding VAT); the adjustment period is 10 years for a building and 5 years for other capital assets, re-testing taxable use each year.
Who makes the capital-asset adjustment after exit?
The member that holds the asset — so if it moved with you, you do, in your own return, using your own taxable-use percentage.
What if taxable use goes up after I leave?
The scheme works both ways: if your taxable use rises, the annual adjustment can allow additional input tax, not just claw it back.
Can Exiloz track the scheme for us?
Yes. We maintain the capital-asset register, carry it across at exit, and calculate each year's adjustment for your return.
Carried an asset out of the group?
Exiloz keeps the Capital Assets Scheme adjustments on track.