UAE VAT Rules Clarify Input Tax Deductions Across Six Employee Expense Areas

Under tax rules issued by the UAE Federal Tax Authority (FTA), registered businesses can recover input value-added tax (VAT) across six categories of employee-related expenses, Arabian Business reported. The provisions took effect on October 1, 2026, following the issuance of FTA Decision No. 17 of 2026 on September 9. The regulation permits recovery solely on the VAT charged on qualifying expenditures, rather than the underlying costs of goods or services, and excludes benefits provided primarily for personal purposes.

The six eligible cost areas comprise work transport, food and beverages, accommodation, temporary housing, telecommunications, and business parking. For transport, recovery applies where journeys directly support work requirements, such as commuting between an employee's home and workplace, journeys to customer premises, and duty-related transit. For food and beverages, recovery is permitted under narrower conditions where personnel work or reside in remote locations lacking meal preparation facilities or nearby restaurants. Routine employee meals and instances where employers provide cash or transport allowances in lieu of the actual services do not qualify.

Under the accommodation provisions, input VAT may be claimed when housing is an operational necessity—such as living near a workplace, project site, or customer location—and does not form part of standard remuneration packages or ordinary benefits. Temporary accommodation supplied to newly hired staff qualifies for up to 30 days, provided it remains proportionate to the employee's role. For telecommunications, employers can recover VAT on mobile phones, calls, data packages, and residential internet required for work or remote duties, provided a documented internal usage policy is maintained and business use remains the primary purpose.

For business parking, companies can recover input VAT provided the expenses are supported by written reimbursement policies and receipts recording the date, time, amount charged, and VAT component. Arabian Business noted that FTA Decision No. 17 establishes clear criteria requiring businesses reviewing claims from October 1 to map expenditures against qualifying categories, avoid substituting qualifying benefits with cash allowances, and retain comprehensive documentation to substantiate operational use.