As per the UAE VAT law tax paid on most of the business, expenses can be recovered. At the same time tax paid on certain expenses cannot be recovered, those are called a non-recoverable tax. As per the Article (53) of Executive Regulation of the UAE VAT law, VAT paid on certain expenses are non-recoverable tax in nature. It includes entertainment expenses and expenses related to the motor vehicle. This blog will be addressing the non-recoverable tax on entertainment services with reference to Public Clarification issued by the Federal Tax Authority in the month of July 2018.
As per the Article (53) (2) (a) of Executive Regulation, entertainment service means hospitality of any kind which includes:
In the case of entertainment services given to the following are not recoverable:
Following are the examples:
Input credit on Catering expenses related to conference and business events can be recovered if fees is charged from the attendees with VAT. Where there are no fees charged from the attendees generally input credit on catering services cannot be claimed.
If the value of the gift is more than AED 500/- per employee for a period of 12 months, it will become a deemed supply and hence will be taxable. If the value is less than AED 500/- per employee for a period of 12 months, it will not be a deemed supply. However, if such gifts are in the nature of entertainment (examples given below) input credit on such expenses cannot be recovered.
Note: this blog is prepared based on Public Clarification given by FTA VAT P 005 and the provisions of the Article 53 of the Executive Regulation of the UAE VAT law. Below is the extract of the Article (53) Executive Regulation.
Emirates Chartered Accountants Group operates a full swing VAT division providing TAX Services in Dubai, Abu Dhabi, Sharjah, Ajman, Fujairah & Ras Al Khaimah. Our Tax experts has vast professional experience in taxation with various industries in the region. We Provide tailored approaches to the clients in the best professional way.
Our Tax Services:
Mr. Pradeep Sai
+971 – 556530001
+971 – 558892750
+971 – 508873115