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Can you claim VAT on client entertainmentin the UAE?

Last reviewed

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

Blocked for clients and free staff events. Modest meals during a business meeting are the main exception.

For the wider rules, see Alcohol and Bars.

When you can claim the VATand when it's blocked

You can claim

  • VAT on hospitality for anyone who isn't your employee (clients, prospects, officials, shareholders, investors) is blocked.
  • Free staff parties, iftars, and team outings are also blocked.

You can't claim

  • Exceptions where VAT is recoverable: modest meals served in the normal course of a business meeting, catering at a conference you charge VAT on, subsistence for employees traveling on business, and normal office refreshments for general use.

Worked examplesand why they land that way

  1. Blocked

    Client dinner

    VAT blocked, 50% deductible.

    Hospitality for anyone outside the company is entertainment, so the 5% VAT is blocked. For corporate tax, only 50% of the cost is deductible.

  2. Blocked

    Company iftar for staff

    VAT blocked, deductible.

    A free event for staff is a personal benefit, so the VAT is blocked. The full cost is still deductible for corporate tax as a staff cost.

  3. Recoverable

    Sandwiches at a client workshop in your office

    Modest food served during a business meeting in your office is one of the exceptions to the entertainment block. The VAT is recoverable with the caterer's tax invoice.

What to keepand what to watch

Documents you need

Receipt plus attendees and purpose, which you need for the corporate tax split anyway.

Corporate tax

Partly deductible. Client and business-contact entertainment is 50% deductible. Staff events are generally deductible as staff costs.

GL account: Entertainment: client / Staff welfare

Common mistakes

Claiming 100% corporate tax deduction on client entertainment. Claiming VAT on a staff party.

Questions peopleask about this

Who counts as a non-employee?

Clients, prospects, officials, shareholders, owners, and investors. VAT on hospitality for any of them is blocked for most businesses.

What are the exceptions?

Modest meals served in the normal course of a business meeting, catering at a conference you charge VAT on, subsistence for employees traveling on business, and normal office refreshments for general use.

How much is deductible for corporate tax?

50% of client entertainment. Staff events are generally deductible in full as a staff cost.

Relatedexpenses

Rules thisanswer relies on