UAE Outlines Conditions for VAT Recovery on Six Employee Expense Categories

The UAE Federal Tax Authority (FTA) has outlined specific regulatory conditions permitting VAT-registered businesses to recover input VAT on six categories of employee-related expenses, Emirates 24|7 reported.

The six eligible categories encompass employee transport, meals under restricted criteria, work-related accommodation, temporary lodging for new staff, mobile and internet services, and business parking. Non-compliance with the statutory conditions for any category results in the complete denial of input tax deductions.

Under the rules, VAT recovery on employee transportation is strictly permitted when travel is confined between a worker's residence and workplace, client visits, or trips directly linked to job duties without personal use.

To qualify for deductions, businesses must maintain a formal contractual obligation or a documented policy. Additionally, employers cannot offer staff a cash allowance as an alternative to providing these services.