Many UAE businesses recover input VAT on staff transport, housing or phones because an employment contract or HR policy says they will provide them. Since 1 October 2026, that is no longer enough on its own.
FTA Decision No. 17 of 2026, issued on 9 September, lists six cases in which input VAT on goods and services given free of charge to employees can be recovered under a contract or documented policy. Each case has conditions, and all of them must be met. Benefits required by UAE labour law are a separate route and remain recoverable.
The six cases
1. Transport
- Used only for home-to-work journeys, client visits or other work purposes
- No personal use
- The employee cannot choose a cash allowance instead
2. Food and drink
- The employee lives in a remote or isolated area
- There are no cooking facilities or nearby restaurants
- Provided only during the work or residence period
- No cash allowance option
3. Employee accommodation
- Provided for operational reasons, not as part of the pay package
- The role requires living close to the workplace, site or client
- For the employee's own use, not family members
- Basic and suited to work needs, without significant leisure features
- No cash allowance option
4. Accommodation for new joiners
- Temporary, for no more than 30 days
- Basic and appropriate to the role
5. Mobile phone, data and internet
- Needed for the job, including remote work or work outside normal hours
- Personal use is minor and not the reason it is provided
- A written usage policy exists, and use is monitored with records kept where the policy is not followed
6. Parking
- Only for business travel, client visits or similar work assignments
- A written policy sets out when parking is reimbursed and how it is approved
- Receipts show the date, amount and VAT
What is not covered
- Anything the employee pays for through a salary deduction is a taxable supply, not a free benefit, and falls outside this Decision.
- A benefit where the employee could take cash instead fails the test for transport, food and accommodation.
- Benefits outside the six cases are recoverable only if another rule allows it, such as a labour law requirement.
What to do now
- List every benefit you provide and the input VAT you recover on it.
- Match each one to a case and check every condition. If one fails, stop recovering that VAT.
- Write the policies the Decision expects, especially for phones and parking.
- Remove cash alternatives where you want to keep recovery, or accept that the VAT is a cost.
- Split benefit costs in your chart of accounts so each case can be traced in an audit.
How Dreambooks helps
Dreambooks lets you code each employee expense to its category, applies the right VAT treatment automatically, and keeps receipts and policies attached to the transactions, so you can show the FTA which case applies and why.
Official sources
- FTA Decision No. 17 of 2026 on input tax recovery on employee expenses
- Ministry of Finance: amendments to the VAT Executive Regulation
- FTA: VAT legislation
This article is general information as of October 2026, not tax advice. Check FTA Decision No. 17 of 2026 and the latest FTA guidance, or speak to your tax adviser, before acting.