VAT on Staff Entertainment in the UAE: What You Can Claim

Key takeaways

• Input VAT on staff parties, Iftar meals and similar entertainment for your own employees is generally non-recoverable in the UAE, according to FTA Public Clarification VATP005.
• The same clarification lists gifts to staff, such as long-service, Eid, wedding or employee-of-the-month gifts, as blocked, unless the gift is accounted for as a deemed supply.
• Input VAT on goods or services given free to employees for their personal benefit becomes recoverable only in three cases: a legal obligation, a contractual obligation or documented policy needed for the role, or a deemed supply.
• Input VAT on entertaining anyone who isn't your employee, including customers, is blocked even when your business makes fully taxable supplies.
• Simple tea, coffee and snacks for general use by staff and visitors, and refreshments that are part of an ordinary business meeting, are recoverable under the normal rules.

What does the VAT law say about staff entertainment?

Article 53 of Cabinet Decision No. 52 of 2017 (the VAT Executive Regulation) blocks input VAT recovery on goods or services bought for employees to use free of charge for their personal benefit, with listed exceptions. A separate limb of the same article blocks VAT on entertainment provided to people who aren't your employees. FTA clarification VATP005 explains how the FTA reads both.

Article 53(2) defines entertainment as hospitality of any kind, including accommodation, food and drink not provided in the normal course of a meeting, and access to shows, events or trips provided for pleasure or entertainment. The test is the purpose of the spend, not the supplier's label on the invoice.

Can I recover VAT on a staff party or Iftar?

No, as a rule. VATP005 gives staff parties and Iftar lunches or dinners for employees as examples of blocked input VAT. The exception for staff parties is where employees pay to attend, in which case the charge has to be treated as a taxable supply of your own.

If you charge a fee, the fee is a supply and carries output VAT, so the numbers have to be set up deliberately. Don't charge a token amount and reclaim the full VAT on the venue and catering; a fee that doesn't reflect the real cost is hard to defend.

Say a SHAMS trading company spends AED 20,000 plus VAT on a year-end dinner for its 15 staff and charges nothing. The VAT on the invoice is a cost to the company, not a claim on the return.

When can VAT on goods and services for employees be recovered?

Input VAT on free goods or services for employees is recoverable in three situations listed in VATP005, and you need to be able to show which one applies.

Source: FTA VATP005 and Article 53 of Cabinet Decision No. 52 of 2017, checked 10 November 2026. VATP005 doesn't state an issue date, so check the FTA site for the current version.

The common failure is relying on habit rather than paper. A benefit that appears in an employment contract or a written staff policy is far easier to defend than one the owner approves verbally each December.

What about gifts, meals and expenses employees pay for themselves?

Gifts to staff are blocked unless accounted for as a deemed supply, while genuine business expenses employees pay for themselves are recoverable with a tax invoice. VATP005 lists long-service, retirement, Eid or festival, wedding or childbirth and employee-of-the-month gifts, and a dinner rewarding service, as blocked.

Expenses an employee incurs on a business trip are different. Overnight hotel costs on a domestic business trip and meals bought for personal consumption during that trip are recoverable under the normal rules, as long as there's a valid tax invoice. But if the employee spends the money entertaining a current or potential customer or supplier, the VAT is blocked as non-employee entertainment.

If you'd rather not track these dates by hand, the free UAE compliance calendar lists your company's VAT and other deadlines.

What is recoverable when it looks like entertainment?

Simple hospitality that is part of a business meeting, and sundry items for general use, are recoverable. VATP005 sets out the conditions for each:

Source: FTA VATP005, checked 10 November 2026. If you can't establish that hospitality was part of a normal meeting, VATP005 says not to recover the VAT.

Blocked: input VAT on staff parties and Iftar meals for employees, unless employees are charged to attend. Source: FTA VAT Public Clarification VATP005, applying Article 53 of Cabinet Decision No. 52 of 2017, checked 10 November 2026.

What most guides don't tell you

• A tax invoice doesn't fix a blocked category. A perfectly valid invoice from the caterer proves the cost, not the right to recover the VAT. Article 53 sits on top of the usual invoice test, so your bookkeeper should code staff party costs as VAT-inclusive expense, not as recoverable input tax.
• Mixed events get split, or get blocked. A client dinner with staff at the table is entertainment for non-employees, which is blocked even where your business makes fully taxable supplies. Don't try to reclaim just the staff share and call the rest "client"; keep a note of who attended.
• Your internal policy decides the meeting-lunch test. VATP005 ties recoverable meeting food to cost per head within your employee subsistence policy. If you haven't written one, you have nothing to measure against.
• Check the employee-fee route before relying on it. Charging staff to attend turns the event into a taxable supply of yours, so output VAT follows. Work out whether the net result is worth the admin.

Frequently asked questions

Can I claim VAT on a company car? Not if the vehicle is available for personal use: Article 53 of Cabinet Decision No. 52 of 2017 blocks input VAT on vehicles that any person can use privately. Check the exact wording of Article 53 against your own use before claiming.

What input VAT can't I recover? Input VAT is blocked on entertainment for anyone who isn't your employee, on vehicles available for personal use, and on goods or services given free to staff for their personal benefit unless an exception applies. Anything else follows the normal recovery rules, which need a valid tax invoice and a business purpose.

Can I recover VAT on business expenses? Yes, where the cost is a genuine business expense and you hold a valid tax invoice, subject to the normal recovery rules. The blocked categories in Article 53 are the exception, not the rule.

How do I claim a VAT refund in the UAE? Blocked VAT such as staff party costs is never part of a refund claim, because it was never recoverable input tax. For the refund process itself, check the FTA's current EmaraTax guidance.

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

Which deadlines apply to your company?

VAT return dates, licence renewals and tax filings differ by company, and missing one costs money. The free UAE compliance calendar is a calendar of your company's UAE tax and compliance deadlines, personalised from a few questions, as a PDF and calendar file.

Sources

• FTA VAT Public Clarification VATP005: Non-recoverable input tax, entertainment services
• Cabinet Decision No. 52 of 2017, Executive Regulation of Federal Decree-Law No. 8 of 2017 on VAT (Ministry of Finance)
• Federal Tax Authority, tax.gov.ae

Last checked: 10 November 2026

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