UAE Staff Perks and VAT: The New Rules on Claiming It Back

Since 1 October 2026, UAE businesses can only claim back VAT on six kinds of staff benefits if they meet a specific list of conditions. The older, looser test of "normal business practice" no longer applies to this route. If your company pays for staff transport, meals, housing, phones or parking in the UAE, your next VAT return is where this will show up.

What happened

The Federal Tax Authority issued FTA Decision No. 17 of 2026 on 9 September and published it on 28 September. It took effect on 1 October 2026, the same day as the wider VAT Executive Regulation changes made by Cabinet Decision No. 149 of 2026.

The decision sets out cases and conditions under Article 53(1)(c)(2) of the VAT Executive Regulation. Before, recovery rested on a self-assessed test: was the benefit necessary for the job, and was providing it normal business practice?

As Alvarez & Marsal put it, "Recovery under the same route now depends on meeting specific conditions prescribed by the FTA for each category of benefit."

The six categories and their conditions

All the conditions for a category must be met together, and the benefit must be backed by a contractual obligation or documented policy.

• Transport. Only for travel between home and work, to client sites or for job purposes. No personal use, and no cash allowance offered instead.
• Food and drink. Only where the employee lives in a remote or isolated area with no cooking facilities or nearby restaurants, food is provided only during the relevant work or residence period, and there is no cash alternative.
• Accommodation. The role must require living near the workplace, site or client. The housing must be for the employee's sole use (family only where it is their usual residence), basic in nature, provided for operational reasons rather than as pay, and with no cash alternative.
• Housing for new joiners. Temporary, for a maximum of 30 days, and basic.
• Mobile phone, data and internet. Must be needed for the job, including remote or after-hours work, with only minor personal use. You need a written usage policy and evidence that you monitor it.
• Parking. Only for business travel, client visits or work assignments, under a written reimbursement policy with approval steps, with receipts showing the date, amount and VAT paid.

The decision covers only these six categories. Other employee benefits need their own VAT analysis.

What this means for your business

The biggest change is the cash option. Many GCC employment packages let staff choose between company transport and a transport allowance, or between company housing and a housing allowance. Under the new conditions, offering a cash alternative for transport, food or accommodation can block VAT recovery on the benefit itself. That makes it a policy-wording issue as much as a tax one.

The second change is paperwork. Phone and parking recovery now depends on written policies and records you can show an auditor. If your phone policy is one line in an offer letter, it may not be enough.

For Qatar, Saudi and Indian groups with a UAE entity, this is easy to miss. Staff benefits are usually set by HR, while VAT is claimed by finance, often through a local accountant. For example, a Doha trading group with a 40-person Dubai branch might pay for shared staff transport and team phones and claim the VAT as it always has. If the branch also offers a transport allowance as an option, or has no written phone policy, those claims may now be at risk.

Accommodation deserves a second look. Cabinet Decision No. 149 of 2026 had already restricted input VAT on staff housing unless it is specifically mandated by the Ministry of Human Resources and Emiratisation. Contracting, logistics and hospitality businesses should review both rules side by side.

Your checklist this month

• List every staff benefit your UAE entities pay for, and the VAT you claim on each.
• Match each benefit to the six categories. Anything outside them needs separate advice.
• Check contracts and HR policies for cash-in-lieu options on transport, food and housing.
• Write a mobile, data and internet policy, and keep evidence that you monitor it.
• Set a parking reimbursement policy with approval steps, and keep receipts that show the VAT.
• Agree who owns the records between HR and finance.
• Speak to your tax adviser before changing VAT positions on current or past returns.

If you track filing dates across several GCC countries and India, one compliance calendar, such as the one in NexCFO, makes changes like this harder to miss.

A few words in a staff policy now decide whether those costs carry recoverable VAT, so an hour with HR this week is well spent.