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Can you claim VAT on alcohol and bar tabsin the UAE?

Last reviewed

Can you recover the VAT?
Blocked
VAT charged
5%
Corporate tax
Partly deductible

Blocked. Bars charge 5%, but drinks with clients or staff can't be claimed.

For the wider rules, see Entertainment.

When you can claim the VATand when it's blocked

You can claim

  • VAT is charged at 5%, but recovery is almost always blocked.
  • Drinks with clients are entertainment, and drinks with staff are a personal benefit given free of charge.

You can't claim

  • Blocked by default.
  • Recoverable only if the cost is recharged at full value with VAT accounted for, which is rare.

Worked examplesand why they land that way

  1. Blocked

    Drinks with a prospect after a meeting

    VAT blocked, 50% deductible.

    The bar charges 5% VAT, but drinks with someone outside the company are entertainment, so you can't claim it. The VAT stays part of the cost. For corporate tax, 50% of the bill is deductible.

  2. Blocked

    Team happy hour paid by the company

    VAT blocked, deductible as a staff cost.

    Drinks the company pays for staff are a free personal benefit, so the VAT is blocked. Unlike client entertainment, the full cost is still deductible for corporate tax as a staff cost.

What to keepand what to watch

Documents you need

Receipt for expense evidence. VAT is not claimable, so the tax invoice matters less.

Corporate tax

Partly deductible. Client entertainment is 50% deductible. Staff social events are generally deductible as staff costs.

GL account: Entertainment: client / Staff welfare

Common mistakes

Coding the spend as 0% VAT because the category is 'ineligible'. VAT was paid; it just can't be recovered, so it stays in the expense cost.

Questions peopleask about this

Is there VAT on alcohol in the UAE?

Yes, bars and restaurants charge 5%. It just can't be claimed back for most business spend, because drinks are either entertainment or a staff benefit.

Should bar tabs be coded at 0% VAT?

No. The VAT was paid, so it stays in the expense cost as VAT you can't recover. Coding it as 0% understates what was spent.

Is VAT on drinks ever recoverable?

Only if you recharge the cost to someone at full value and account for VAT on the recharge. That's rare, so treat bar spend as blocked by default.

Relatedexpenses

Rules thisanswer relies on