Can I recover VAT on a company car?

Article 53 – Non-recoverable Input Tax 33 1. Input Tax shall be non-recoverable if it is incurred by a Person in the following cases: a. Where the Person is not a Government Entity as specified in a Cabinet Decision in accordance with Article 10 and 57 of the Decree-Law, and there is provision of entertainment services to anyone not employed by the Person, including customers, potential customers, officials, or shareholder or other owners or investors. b. Where motor vehicles were purchased, rented or leased for use in the Business and are available for personal use by any Person. c. Where Goods or Services were purchased to be used by employees for no charge to them and for their personal benefit including the provision of entertainment services, except in the following cases: 1) Where the provision of those Goods or Services to the employees is mandatory under the applicable labour legislation in the State or any free zone, including financial and non-financial free zones, provided that this does not include the accommodation provided by the employer to its employees, unless the provision of such accommodation is mandatory pursuant to the decisions or directives issued by the Ministry of Human Resources and Emiratisation.34 2) Where it is a contractual obligation or documented policy to provide those Goods or Services to the employees, in accordance with the cases and 33 Article amended as per Cabinet Decision No. 100 of 2024. 34 Sub-clause amended as per Cabinet Decision No. 149 of 2026. Cabinet Decision No. 52 of 2017 and its amendments – As published by the Ministry of Finance 42 conditions specified by the Authority.35 3) Without prejudice to Clause 1 of this paragraph, where the Taxable Person provides health insurance, including enhanced health insurance, to its employees and their family members (as applicable) up to a husband or one wife, and three children younger than eighteen years. 4) Where the provision of goods or services is a deemed supply under the provisions of the Decree-Law. 2. For the purposes of this Article: a. The phrase “entertainment services” shall mean hospitality of any kind, including the provision of accommodation, food and drinks which are not provided in a normal course of a meeting, access to shows or events, or trips provided for the purposes of pleasure or entertainment. b. The phrase “motor vehicle” shall mean a road vehicle which is designed or adapted for the conveyance of no more than 10 (ten) people including the driver. A motor vehicle shall exclude a truck, forklift, hoist or other similar vehicle. 3. Provision of catering and accommodation services shall not be treated as entertainment services where it is provided by a transportation service operator, such as an airline, to passengers who have been delayed. 4. A motor vehicle shall not be treated as being available for private use if it is within any of the following categories: a. a taxi licensed by the competent authority within the State; b. a motor vehicle registered as, and used for purposes of an emergency vehicle, including by police, fire, ambulance, or similar emergency service; c. a vehicle which is used in a vehicle rental business where it is rented to a customer.

10. Company cars and Demo cars 10.1. Input tax recovery on the purchase, rent or lease of a company car The input tax incurred on the purchase, rent or lease of a company car is blocked15 if the car is available for the personal use of an employee. Please note that the fact that a car is taken home by an employee will not of itself preclude a taxable person from recovering input tax provided the reason for this is to ensure that the vehicle is available for emergency purposes, or the nature of the job (and vehicle) is such that it requires the employee to keep the vehicle with himself/herself. The key point, however, is whether the vehicle will be available for personal purposes as well. Where the vehicle is available for personal purposes, the input tax incurred on the purchase, rent or lease of the vehicle is blocked in full. It is important to note that where the input tax on the purchase, rent or lease of a company car is blocked, a taxable person should not recover input tax incurred on associated expenses such as insurance, maintenance, servicing etc. 10.2. Demo cars Motor vehicle traders often display demo cars in their showrooms for demonstration/ test drive purposes. As a demo car cannot be sold at the full retail value, the manufacturer may agree to make a one-off payment in respect of each demo car to compensate the trader for the lower retail value. Where the payment made by the original manufacturer is a genuine reduction of the original sales price, such a payment will be considered as a retrospective discount. In such a case, the original manufacturer should issue a credit note to reduce the original sales price. In contrast, if the payment relates to any obligations assumed by the motor vehicle trader to perform a specific activity (such as marketing services), the payment will be treated as consideration for a taxable supply and the motor vehicle trader will be required to issue a tax invoice and charge VAT at the appropriate rate depending on the nature of the supply. 15 Article 53(1)(b) of the Executive Regulation. Automotive Sector | VAT Guide | VATGAM1 29