FTA has released a public clarification on recoverability of input tax on entertainment expenses. The clarification has been summarized below:

• To Non-Employees – A Designated Government Entity (‘DGE’) can provide services to anyone other than employees and can recover the input tax (meetings with delegations, representatives, etc.).For entity other than a DGE, the input tax is not recoverable except normal business meetings

• To employees – Input VAT on such costs shall be non-recoverable except following circumstances where:

  • It is a legal obligation under any applicable labour law in the UAE
  • It is a contractual obligation/ documented policy and it can be proven to be a normal  business practice
  • Provision of goods/ services is a deemed supply • Where simple hospitality is provided i.e. short lunch break, cost within company’s policies, then such input tax is recoverable. Also, such services should not be accompanied by any form of entertainment.

• Conferences – Recoverability would depend whether any fee is charged or not. If yes, then the input VAT can be recovered. In case no fee is charged, the input tax shall be blocked.

• Employee Entertainment – Input VAT on expenses to entertain employees, gifts, etc shall be blocked unless any charges are recovered from them.

Role of GST for Restaurants

Download public clarification on recoverability of input tax on entertainment expenses

 

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