The United Arab Emirates has set specific tests for employers seeking to reclaim value-added tax (VAT) on six types of staff expenses, with the new rules taking effect Oct. 1.
The Federal Tax Authority (FTA) issued Decision No. 17 of 2026 to govern claims on goods and services provided to employees without charge under a contractual obligation or documented policy. The decision concerns employers’ input tax claims; it does not direct companies to change pay or withdraw benefits. Each expense must qualify under the conditions for its category.
The six categories are employee transport, food and beverages, operational accommodation, temporary housing for new employees, mobile phones and internet services, and parking. Transport must be for commuting or job duties, with no personal use or cash alternative.
Food claims have location and access requirements. The employee must live in a remote, distant or isolated area, and suitable food-preparation facilities must be lacking at the residence or workplace, with no easily accessible food outlet nearby. The food must relate to work or a period of residence required for the job, and employees cannot take cash instead.
Operational accommodation must meet a business need. The rules restrict family use and amenities, and employers cannot provide compensation in place of the accommodation. A separate provision permits suitable temporary accommodation for a new employee for no more than 30 days.
For mobile phones, airtime, data packages and home internet accessed through a modem or router, employers must show a work need, maintain a documented use policy and monitor compliance reasonably. Personal use must be “incidental and insignificant,” and records must address unauthorized use. Parking fees must be incurred solely for business and relate directly to job duties or business visits. Employers also need reimbursement and approval policies, with payment records showing the date, time, fee and tax paid.
The UAE’s standard VAT rate is 5%, and input tax that cannot be recovered remains a business cost. The amended VAT executive regulation separately addresses qualifying benefits required by labor legislation and specified employee and family health insurance. For employer-provided housing, the separate labor-law provision applies only when ministry decisions or directives require the accommodation.
