All About Non-Recoverable Tax on Entertainment Services in UAE
What Does Non-Recoverable VAT Mean for Entertainment Services?
The UAE VAT law says businesses can recover most tax paid on goods and services. But sometimes, you can’t get VAT back. Article 53 of the VAT Executive Regulations explains this clearly. VAT on entertainment, hospitality, and accommodation services, plus food and drinks not served in normal meetings, and tickets for events or shows just for fun, is non-recoverable. That means you pay VAT but can’t claim it back.
Let’s look at how this works for companies in the UAE.
Can Businesses Recover VAT on Entertainment for Non-Employees?
If your business gives hospitality or entertainment to anyone not on your staff, you can’t claim back the VAT you paid. This means you lose the VAT spent on entertaining customers, clients, officials, investors, or owners. UAE law says that only staff-related entertainment may allow input VAT recovery, and even then, only in some cases.
Can You Recover VAT on Entertainment for Employees?
Most of the time, VAT on entertainment for employees is non-recoverable. If you buy things to reward staff, or if you throw events or parties for them, you can’t get the VAT back. But, there are some exceptions. You can recover VAT if:
- The service is required under UAE labor law or a designated zone rule.
- The service is promised in the employee contract or company policy.
- The goods or services count as a deemed supply under UAE VAT law.
Examples: When Can You Recover VAT? When Can’t You?
You can recover VAT in these cases:
- The business pays for a hotel stay for a new staff member for a few days so they can start work. This is part of helping them do their job, so input tax is recoverable.
- The company gives lunch during meetings, or regular office snacks and drinks. These are normal business needs, so you can recover the VAT paid.
You can’t recover VAT in these cases:
- If you host an Iftar, a birthday party, a gala dinner, or a music event for your employees, you can’t claim the VAT.
- If the company pays for parties or entertainment outside of work reasons, input tax is not recoverable.
What About Catering at Conferences and Business Events?
You can recover VAT on food and drinks at conferences or business events only if the business charges a fee to attend, and the fee includes VAT. If people attend for free, then the VAT you paid for food and drinks can’t be claimed back.
You can also recover VAT on some smaller office costs, like flowers for receptions or snacks for meetings.
Can You Recover VAT on Gifts for Employees?
If you give an employee a gift valued at more than AED 500 in a year, the gift is a deemed supply, and you need to charge VAT. If it’s under AED 500, it’s not taxable as a deemed supply. But, if the gift is entertainment—like an Eid gift, a retirement present, or an award—the VAT on that gift is non-recoverable. You pay the VAT and can’t claim it back.
Simple Points to Remember About Non-Recoverable VAT
- Most VAT on entertainment, hospitality, and events can’t be recovered.
- You can recover VAT if the expense is legally required, written in the contract, or counts as a deemed supply.
- Some business costs—like snacks, drinks, or required accommodation—let you recover VAT.
- Gifts and events mainly for fun or rewards will not allow VAT recovery.
- Always keep clear records of every expense and the reason for it.
How Mubarak Al Ketbi (MAK) Auditing Can Help
Mubarak Al Ketbi (MAK) Auditing supports UAE businesses with all VAT matters. Our team explains the difference between recoverable and non-recoverable VAT, and we help you stay safe with the law. When it comes to tax and rules, “better safe than sorry” is the best advice you can follow!
- For more information, visit our office:
- Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates
- Or contact/WhatsApp: +971 50 276 2132
