Businesses can now claim VAT back on six employee expense categories

The UAE's Federal Tax Authority (FTA) has identified six categories of employee expenses on which businesses subject to value-added tax (VAT) may recover or deduct input tax, including transport, food and beverages, work-related accommodation, temporary housing for new employees, mobile phones and internet services, and parking fees.

The provisions, outlined in FTA Decision No. 17 of 2026, which took effect last month, establish detailed conditions to ensure that the goods and services are provided for business purposes rather than as personal benefits to employees.

The decision does not allow companies to recover the full cost of eligible expenses. Instead, they may reclaim or deduct only the VAT included in those costs. For example, if an eligible service costs Dh105, including Dh5 in VAT, the recoverable or deductible amount is the Dh5 tax component alone, provided all relevant requirements are met.

Transport expenses: The decision allows businesses to recover input VAT paid on employee transport services, provided they are used exclusively for journeys between an employee's home and workplace, travel to client premises or other journeys directly related to their duties. The transport service must not be used for personal benefit, and employees must not have the option of receiving a cash allowance or financial compensation instead.