Entertainment Services – Non-Recoverable Input Tax

Entertainment Services – Non-Recoverable Input Tax

Article 53 of Executive Regulations defines Entertainment Services as follows:

Entertainment services are defined under Article 53(2) of the Executive Regulations as “hospitality of any kind” including the provision of:

  1. accommodation;
  2. food and drinks which are not provided in a normal course of a meeting; and
  3. access to shows or events, or trips provided for the purposes of pleasure or entertainment.


General Rule: Input Tax on Entertainment expenses incurred by the taxable person for employees shall be non-recoverable.

Exceptions: The only circumstances in which a taxable person in entitled to recover VAT on such costs are:

1. where it is a legal obligation to provide those services or goods to those employees under any applicable labour law in the UAE or Designated Zone in which the entity is;

2. it is a contractual obligation or documented policy to provide those services or goods to those employees in order that they may perform their role and it can be proven to be normal business practice in the course of employing those people; or

3. where the provision of goods or services is a deemed supply under the provisions of the Decree-Law.

For example, where a new employee joins a business and is provided with hotel accommodation for a short initial period prior to finding their own accommodation, this would not be considered entertainment and the VAT incurred on such costs would be recoverable, as this cost is necessary for the person to perform their role.
However, where a business organizes a lunch or dinner for employees e.g. a Ramadan Iftar, this
would be considered to be entertainment and the VAT incurred on such costs would be blocked from


  1. Expenses incurred by employees for food & accommodation in the business trip shall not be treated as Entertainment Expenses.
  2. Simple Hospitality provided in the normal course of a business meeting e.g. where simple food & refreshments are provided during the course of a meeting, the cost is considered to be recoverable. However, where the food & refreshments are considered to be so substantial that they would constitute an end in themselves and may have encouraged someone to attend the meeting, the input tax incurred is non-recoverable. For example, a gala dinner event with a short introduction by a speaker would not be considered to be food and beverage in the normal course of a business meeting and the input tax incurred on such costs shall be blocked from the recovery, where no charge is made for the attendance.
  3. Sundry office incidental expenses for general use by both employees and visitors such as tea & coffee available in the office, flowers for display in reception, dates,chocolates or equivalent snack available in the office shall not be treated as Entertainment Services.
  4. Where events are held purely for the purposes of entertaining staff, for example staff parties, the VAT incurred shall be blocked from recovery unless a charge is made to the employee for attending.
  5. Purchase of goods/services to be given away to staff free of charge in order to reward them for long service or for any other purpose shall be treated as Entertainment Services.



Input Tax shall be non-recoverable if it is incurred by a person in respect of entertainment services provided to anyone not employed by the person including Customers, Potential Customers, Officials, Investors etc.

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