UAE Implements FTA Decision 17 of 2026 on Employee Expense VAT Recovery

The UAE Federal Tax Authority (FTA) enacted Decision No. 17 of 2026 on October 1, 2026, introducing defined statutory conditions under which businesses can recover input Value Added Tax (VAT) on employee expenses, according to Dubai Business and Tax Advisors.

The new regulations replace the previous general standard of 'normal business practice' with explicit legal criteria across several expense categories, specifically covering employee accommodation, transportation, meals, and medical coverage.

Under the updated rules, taxable entities cannot recover input VAT if cash allowances are provided as alternatives or if the expenses result in personal private benefits for employees. The FTA specifies that meeting only part of the statutory criteria within a category will lead to complete denial of the input tax recovery.

To support tax deductions, the FTA requires companies to retain formal contractual documents and established employment policies substantiating that all conditions for VAT recovery have been satisfied.