VAT on a Company Car in the UAE: When You Can and Can't Claim

Key takeaways

• Input VAT on a company car is blocked in the UAE when the car is bought, rented or leased for the business but is available for personal use by anyone, under Article 53 of Cabinet Decision No. 52 of 2017.
• A "motor vehicle" for this rule is a road vehicle designed or adapted to carry no more than 10 people including the driver, so ordinary cars, SUVs and most pickups and passenger vans are covered.
• A licensed taxi, a vehicle used in a vehicle rental business and rented to a customer, and a police, fire or ambulance vehicle are not treated as available for personal use, so those vehicles are not caught by the blocked-VAT rule.
• Leasing and renting do not avoid the block: Article 53 names vehicles "purchased, rented or leased", so the 5% VAT in each lease instalment is blocked on the same basis as VAT on a purchase.
• If a business recovers input VAT on a vehicle and the use later changes, Article 56 of the Executive Regulation requires repayment of input tax that is no longer attributable, with an adjustment window of five years from the date of supply.

Can a UAE company claim VAT on a company car?

Usually not. Article 53 of Cabinet Decision No. 52 of 2017 (the Executive Regulation of the VAT law) makes input VAT non-recoverable on motor vehicles that a business purchases, rents or leases for use in the business when those vehicles are available for personal use by anyone. At the 5% standard rate (u.ae, as of 10 November 2026), the VAT on a car is a real cost: you can't offset it against the VAT you charge customers.

The test has two parts: the vehicle must be a "motor vehicle" as the regulation defines it, and it must be available for personal use. If both are true, the VAT is blocked. The main counter-case is the short list of vehicles the regulation says are not treated as available for personal use, shown in the table below.

Article 53 was amended by Cabinet Decision No. 100 of 2024, effective 15 November 2024, so check any older guidance you find against the current text. The rule is federal: Article 53 contains no carve-out by emirate or free zone, and a company is treated the same whether its licence comes from a mainland department or a free zone authority.

Which vehicles does the blocked-VAT rule cover?

The rule covers any road vehicle designed or adapted to carry no more than 10 people including the driver. Saloons, SUVs and most pickups and passenger vans fall inside that definition; a bus built for more than 10 people falls outside it.

Accurate as of 10 November 2026. "Blocked rule does not apply" means the vehicle isn't caught by this rule; the ordinary conditions for recovering input VAT still apply.

Does the blocked-VAT rule apply to leased and rented cars?

Yes. Article 53 covers motor vehicles "purchased, rented or leased" for use in the business, so VAT on a lease instalment or a rental charge is blocked in the same way as VAT on a purchase price.

Say a Dubai trading company buys an SUV that the sales director can also use at weekends, and separately leases a second one. The figures below are a hypothetical illustration at the 5% rate.

The lease looks cheaper month to month, but the blocked VAT adds up across the term. When you compare buying with leasing, compare the totals including the VAT you can't recover.

What happens if a vehicle's use changes later?

If you recovered input VAT on a vehicle and the use later changes so that the tax is no longer attributable to what you recovered it for, Article 56 of the Executive Regulation requires you to repay that input tax. The adjustment applies where the change in use happens within five years of the date of supply.

Say a company recovered VAT on a car in its vehicle rental fleet, then assigns that car to a manager for private use two years later. That change falls inside the five-year window, so the company should take advice on the repayment calculation before its next VAT return. A single car also won't help you with the capital asset scheme: a Capital Asset is a single item of expenditure of AED 5,000,000 or more excluding tax (Article 57), so a typical company car sits outside it.

How do you treat a blocked company car in your books and VAT return?

Record the VAT on a blocked vehicle as part of the vehicle's cost (or the lease or rental expense), not as recoverable input VAT, and leave it out of the input tax you claim on your VAT return in EmaraTax.

1. Classify the vehicle when you buy or lease it: confirm it meets the 10-person definition, and check whether it falls within the taxi, rental or emergency vehicle exclusions.
2. Get a tax invoice in your company's name, so your records show the cost and the VAT charged even though the VAT is blocked.
3. Post the VAT to the vehicle or lease cost, not to your input VAT account.
4. Exclude that VAT from the input tax you claim in your VAT return on EmaraTax.
5. Keep a written note of who can use the vehicle and re-check the classification whenever the use changes.

VAT return deadlines are the ones people tend to miss; if you'd rather not track them by hand, the free UAE compliance calendar lists them for your company.

10 people including the driver: the seating limit in the Executive Regulation's definition of a "motor vehicle" for the blocked-VAT rule. Source: Cabinet Decision No. 52 of 2017, Article 53(2), as amended by Cabinet Decision No. 100 of 2024 (effective 15 November 2024), checked 10 November 2026.

What most guides don't tell you about VAT on company cars

• The test is availability, not actual use. Article 53 blocks VAT on vehicles "available for personal use", so a car that nobody drives privately can still fail the test if it could be. A written use policy and keys held at the office help support your position, but whether a particular arrangement counts as "not available" depends on the facts, so get advice before relying on it.
• The rental exclusion follows the use. The exclusion is for a vehicle used in a vehicle rental business where it is rented to a customer. A car from your rental fleet that you hand to a staff member for their own use isn't being rented to a customer, so don't assume the exclusion carries over.
• Running costs are a grey area. The article's wording is about vehicles that are purchased, rented or leased. Whether fuel, servicing, insurance and parking follow the same block isn't set out in the wording we checked; confirm the position in the FTA's Automotive Sector VAT Guide and apply your approach consistently.
• Vehicles you sell are a different case. Cars bought as stock by a dealer aren't bought "for use in the business" in the ordinary sense, and used-car sales have their own FTA guidance (including a profit margin scheme). This post doesn't cover that sector.

Which VAT deadlines apply to your company?

Blocked and recoverable VAT both end up on a return with a due date. Qawi's free calendar of your company's UAE tax and compliance deadlines, personalised from a few questions, comes as a PDF and calendar file: get your UAE compliance calendar.

Frequently asked questions

Can I recover VAT on business expenses? Generally yes: a VAT-registered business can reclaim VAT it pays on business-related goods and services (u.ae). The exceptions are the non-recoverable categories in Article 53 of the Executive Regulation, such as motor vehicles available for personal use.

What input VAT can't I recover? Article 53 blocks input VAT on entertainment services provided to anyone not employed by the business, on motor vehicles available for personal use, and on goods or services bought for employees' free personal benefit. Exceptions to the employee rule include a legal obligation to provide the benefit and employee health insurance.

Can I claim VAT on staff entertainment? Entertainment (hospitality of any kind, including accommodation, food and drinks) provided to people who are not your employees is blocked under Article 53. For staff, VAT on goods or services bought for their free personal benefit is blocked unless an exception applies, such as a legal obligation, a contractual obligation or documented policy, or employee health insurance.

About Qawi · Qawi is a corporate services firm licensed in the Sharjah Media City (SHAMS) free zone, handling company formation, visas and PRO, bookkeeping, VAT and corporate tax for UAE businesses. Guides are researched from FTA, Ministry of Finance and free zone sources. Qawi on LinkedIn

Sources

• Executive Regulation of Federal Decree-Law No. 8 of 2017 on VAT (Cabinet Decision No. 52 of 2017, as amended), Ministry of Finance: Articles 53, 56, 57 and 58; amendments by Cabinet Decision No. 100 of 2024, effective 15 November 2024. The Ministry's copy is marked as an unofficial translation.
• Value Added Tax (VAT), UAE Government Portal (u.ae): 5% rate and input tax recovery on business-related purchases.
• Automotive Sector VAT Guide, Federal Tax Authority: referenced as the place to confirm treatment of running costs and the vehicle trade.

Last checked: 10 November 2026

This is general information, not tax or legal advice for your specific situation.