UAE VAT rules change staff expense claims: What businesses need to review

Dubai: UAE businesses have until October 1 to review how they claim VAT on employee expenses, as new rules introduced on October 1 specify conditions for certain staff benefits. The change affects whether employers can recover tax paid on those costs. The Federal Tax Authority (FTA) issued Decision No. 17 of 2026 on September 9, which will take effect on October 1.

This decision sets specific conditions for six categories of benefits provided free to employees under contractual obligations or documented company policies. These categories include staff transport, accommodation, meals, communications, parking and new recruits' accommodation. Businesses must check if the benefits provided meet the eligibility requirements for each category, such as staff transport covering commuting or work duties, meals meeting remote-location conditions, and operational accommodation meeting work requirements rather than being part of ordinary compensation.

Employers cannot simply rely on the existence of a benefit in a contract or company policy to qualify for VAT recovery; they must ensure the arrangement meets the relevant conditions. The financial impact on businesses depends on the VAT incurred and the extent to which the claim is eligible for recovery.