VAT recovery rules tighten for staff transport, meals, accommodation and phones

UAE businesses must review VAT recovery claims on employee benefits after Federal Tax Authority Decision No. 17 of 2026 took effect on October 1. The new rules set specific conditions for six benefit categories: staff transport, meals, operational accommodation, new recruits' temporary accommodation (up to 30 days), phones and internet, and parking. For staff transport, benefits must cover commuting or work duties, exclude personal use and offer no cash alternative. Meals qualify only when remote-location conditions apply, such as lack of suitable cooking facilities or accessible food outlets. Operational accommodation must meet work requirements rather than form part of ordinary compensation. Phones and internet must support work with only insignificant incidental personal use, documented rules and monitoring. Parking must relate to business duties with an approval policy and payment records. The distinction matters: a company may continue providing a benefit even when it cannot recover the associated VAT, but the unrecovered tax becomes part of its operating cost. Recording a benefit in a contract or staff handbook does not automatically establish entitlement to recover VAT—the arrangement must satisfy the relevant conditions. Tax experts estimate additional annual costs could reach hundreds of thousands of dirhams for some large employers, depending on spending and ineligible VAT amounts.