Can I recover VAT on mobile phones given to employees?

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.

The type of entertainment expenses which are covered by the restriction include hospitality (e.g. accommodation, food and drinks) which are not provided in the normal course of a meeting, access to shows or events, or trips provided for the purposes of pleasure or entertainment. This means that where a business incurs any such expenses, the business will not be able to recover VAT incurred on the expenses. 10.6.2. Motor vehicles Typically, a taxable person is able to recover VAT incurred on the purchase, lease or rental of a motor vehicle which is used for their business activities and which give right to input tax recovery. However, where the motor vehicle is available for the personal use of any person, the taxable person will lose the right to recover the VAT incurred. For the purpose of this rule, the “motor vehicle” is any road vehicle which is designed or adapted for the conveyance of no more than 10 people, including the driver. “Motor vehicle” does not include a truck, forklift, hoist or other similar vehicles. This ensures that VAT on essentially commercial vehicles is not blocked due to incidental private use. A motor vehicle will not be treated as being available for private use if it is within any of the following categories:    a taxi licensed by a competent authority; a motor vehicle registered as, and used as an emergency vehicle, including by the police, fire brigade, paramedics, or similar emergency services; and a vehicle which is used in a vehicle rental business where it is rented to a customer. 10.6.3. Employee-related expenses The third category of expenses which do not give rise to VAT recovery are certain expenses incurred by a business for the purposes of their employees. VAT on employee-related expenses will not be recoverable by the business where goods or services are purchased to be used by employees for no charge to them and for their personal benefit. There are, however, certain exceptions from the above rule. Thus, the rule will not apply in the following situations: 1. Where the employer has a legal obligation to provide those goods or services to the employees under any applicable UAE labour law. 2. Where it is a contractual obligation or documented policy of the employer to provide those goods or services to employees to enable them to perform their role and where it can be proven to be normal business practice to do so in the course of employment. 40 VAT Guide | Taxable Person | VATG001

VATP028 توضيح عام بشأن ضريبة القيمة المضافة VAT Public Clarification Mobile Phones, Airtime, and Data Packages Made الهواتف المتحركة ودقائق المكالمات وحزم البيانات المُ تاحة للموظفين ألغراض األعمال Available to Employees for Business Use الموضوع Issue Many businesses enter into agreements with تدخل العديد من األعمال في اتفاقيات مع مزودي خدمات telecommunication service providers to make االتصاالت لتوفير هواتف متحركة ("الهواتف") وباقات mobile phones (“Phones”), airtime (“Airtime”) (i.e. )"دقائق مكالمات ("المكالمات") وحزم بيانات ("الحزم call minutes) and data packages (“Packages”), لموظفيها ألداء مهامهم الوظيفية في غير أوقات العمل أو في available to their employees to perform their roles ،19-ونظرا النتشار فيروس كوفيد .أماكن بعيدة عن المكتب ً outside office hours or at locations away from the مما أدى في بعض الحاالت،زادت ترتيبات العمل من المنزل office. Due to COVID-19, there has been an إلى قيام أصحاب األعمال بدفع نفقات الهواتف والمكالمات increase in work-from-home arrangements, .والحزم للسماح للموظفين بأداء مهامهم عن بُعد resulting in some instances where employers pay for Phones, Airtime, and Packages’ expenses to allow employees to perform their roles remotely. Due to the potential private use of Phones, Airtime, ونظرً ا لالستخدام الشخصي المحتمل للهواتف والمكالمات and Packages, there has been uncertainty as to كان هناك التباس وعدم يقين بشأن،والحزم من قبل الموظفين whether a business is entitled to recover the ما إذا كان يحق لألعمال استرداد ضريبة المدخالت ذات related input tax and, if so, what the requirements فما هي الشروط التي يجب استيفاؤها، وإذا كان كذلك،الصلة are to be entitled to input tax recovery. .للتأهل السترداد ضريبة المدخالت This Public Clarification provides guidance on the يقدم هذا التوضيح العامّ إرشادات بشأن تطبيق تشريعات application of the VAT legislation in respect of the ضريبة القيمة المضافة فيما يتعلق باسترداد ضريبة recovery of input tax incurred on Phones, Airtime, المدخالت المتكبدة عن الهواتف والمكالمات والحزم التي يت ّم .الحصول عليها ألغراض األعمال and Packages acquired for business use. 1/6