Is VAT charged on restaurant service charges and tips?

Answered by TI from the Federal Tax Authority’s own law · 15 September 2026. Guidance, not tax advice: rely on the official text.

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A compulsory service charge is part of the meal price and is taxed at the same rate as the meal (5% in the UAE): VAT is charged on it. A tip the customer freely chooses to give is not part of the price: no VAT is charged on it.

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The detail

Under FTA guidance, a service charge imposed on the customer is further consideration for the principal catering supply and takes the same VAT liability as that supply — for restaurant food in the UAE, 5%. A tip the customer gives freely, over and above the total charge, is outside the scope of VAT and no VAT is due on it. Compulsory service charges should therefore be included in the taxable value, while discretionary tips are not.1

What the law says

If a person charges a service charge to customers, it is further consideration for the principal supply (e.g. catering services) and follows the same VAT liability as that supply (FTA guidance, Taxable Person Guide).1 Based on FTA guidance
If the customer freely gives a tip over and above the total charge, no VAT is due on the tip and it is outside the scope of VAT (FTA guidance, Taxable Person Guide).1 Based on FTA guidance

What it depends on

The service charge must be a charge imposed by the restaurant (not a voluntary payment by the customer) for it to form part of the taxable supply.1 Based on FTA guidance
The VAT rate applied to the service charge follows the principal supply; restaurant catering in the UAE is standard-rated at 5%.1 Based on FTA guidance

Check before you rely on it

Check whether the service charge is compulsory on the bill or left to the customer's discretion.
Confirm the VAT rate applied to the restaurant's principal supply (standard 5%).

Sources (1) — read the official text

1Taxable Person Guide - Value Added TaxFTA guidance

Read the article
Since the lounge access is incidental to the provision of the supply of the international flight, both components will be treated as a single composite supply subject to VAT at 0%. 5.5. Service charges and tips If a person charges a service charge to their customers, it is further consideration for the principal supply (e.g. catering services) and follows the same VAT liability as that supply. If the customer, however, freely gives a tip over and above the total charge, no VAT is due on the tip and it is outside the scope of VAT. 22 VAT Guide | Taxable Person | VATG001

Official PDF, p. 23Captured from the FTA website on 9 Sep 2026

Helpful?

What the law says:
- If a person charges a service charge to customers, it is further consideration for the principal supply (e.g. catering services) and follows the same VAT liability as that supply (FTA guidance, Taxable Person Guide). [1]
- If the customer freely gives a tip over and above the total charge, no VAT is due on the tip and it is outside the scope of VAT (FTA guidance, Taxable Person Guide). [1]

What it depends on:
- The service charge must be a charge imposed by the restaurant (not a voluntary payment by the customer) for it to form part of the taxable supply. [1]
- The VAT rate applied to the service charge follows the principal supply; restaurant catering in the UAE is standard-rated at 5%. [1]

Check before you rely on it:
- Check whether the service charge is compulsory on the bill or left to the customer's discretion.
- Confirm the VAT rate applied to the restaurant's principal supply (standard 5%).

Sources:
1. Taxable Person Guide - Value Added Tax — p. 23

Written by AI from the FTA sources above and checked before display. Not tax advice or official FTA information - confirm with a tax adviser before you act. Full disclaimer

Is VAT charged on restaurant service charges and tips?

The detail

What the law says

What it depends on

Check before you rely on it

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