UAE VAT Update: Employee Expenses
Effective from 1 October 2026
Dear Client,
FTA Decision No. 17 of 2026 sets specific conditions for recovering VAT on benefits provided free to employees under an employment contract or documented policy.
All conditions for the relevant category must be satisfied:
Expense / legal reference| Conditions for VAT recovery
Transport — Article 2(1)| Home-to-work, client or job-related travel only; no personal use; no cash alternative.
Food and beverages — Article 2(2)| Remote employee residence; no suitable cooking facilities or easily accessible restaurants; linked to required work/residence periods; no cash alternative.
Accommodation — Article 2(3)| Operational necessity, rather than remuneration; residence near work required; no cash alternative; basic facilities. Employee-only use, subject to the permanent-residence exception.
New joiner accommodation — Article 2(4)| Temporary accommodation for no more than 30 days, appropriate to job and basic residential needs.
Phones and internet — Article 2(5)| Necessary for duties; personal use insignificant; written usage rules and consequences; reasonable monitoring and records.
Parking — Article 2(6)| Solely job-related; written reimbursement/approval policy; receipts recording date, time, amount and VAT.
Legal basis: Article 1 links these rules to Article 53(1)(c)(2) of Cabinet Decision No. 52 of 2017, as amended. Article 3 establishes the effective date.
Other points to consider
Employee benefits for personal use are generally blocked unless an applicable exception applies. Article 53 separately addresses benefits mandatory under labour legislation; accommodation under that route must be mandatory under MOHRE decisions or directives.
Therefore, ordinary staff lunches, housing benefits and personal parking should not automatically be treated as recoverable merely because the company pays for them.
Normal invoice, payment and input-tax apportionment requirements also remain relevant. A qualifying expense does not automatically mean full recovery where the business makes exempt supplies.
Recommended action: Please provide your employee-benefit policies, employment terms, supplier tax invoices and supporting expense records so we can assess eligibility before claiming VAT.
Official references:
- “FTA Decision No. 17 of 2026 — open “View PDF”” (https://tax.gov.ae/en/content/fta.decision.no.17.of.2026.on.cases.and.conditions.for.input.tax.recovery.on.employee.expenses.aspx)
- “VAT Executive Regulation — Article 53, pages 42–43” (https://tax.gov.ae/Datafolder/Files/Legislation/2026/Law-No-8-of-2017-and-its-amendments–09-2026.pdf)
Kind regards,
Abstract Accounting & Auditing
