Under VAT in UAE, registered businesses are eligible to recover the VAT paid on purchase of goods and services used for business purposes. In addition, there are certain supplies on which input tax recovery is not allowed. This article is regarding non recoverable input tax on Entertainment Services.


Entertainment services are defined under Article 53(2) of the Executive Regulations as “hospitality of any kind” including the provision of:
• Accommodation
• Food and drinks which are not provided in a normal course of a meeting
• Access to shows or events
• Trips provided for the purposes of pleasure or entertainment.


• Simple hospitality is provided in the normal course of a business meeting e.g. simple food and refreshments
• The hospitality is provided at the same venue as the meeting
• The meeting is interrupted, only by a short break for the provision of hospitality
e.g. Lunch break
• The cost per head of providing the hospitality does not exceed any internal policy the business
• The food and beverage provided is not accompanied by any form of entertainment
e.g. a motivational speaker, a live band etc.

NOTE : However, where the food and 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.


A) Conference and Business events
• Where a fee is charged and VAT is accounted on the same, the input tax incurred on catering services would be recoverable
• Where no fee is charged, the input tax related to catering services will be blocked


B) Sundry office expenses
The expenses which FTA considers the business should be entitled to input tax recovery include:
• Tea and coffee available in the office or during meetings for general use by employees and non-employees for no charge
• Flowers for display in receptions, offices or for decoration during special events
• Snacks which may be available in the office or during meetings for general use by employees and non-employees for no charge


C) Employee entertainment
• Where events are held for entertaining staff, the VAT incurred on the associated costs shall be blocked from recovery unless a charge is made to the employee for attending
• Taxable Persons may also purchase goods or services to be given away to staff free of charge, in order to reward them for long service, the VAT incurred on such costs should be blocked from recovery
e.g. Long service awards, retirement gifts, gifts for festivals or special occasions etc.


D) Employee expenses
• Where a taxable person will reimburse an employee for certain costs which the employee incurs for business purposes , the VAT incurred is recoverable where a tax invoice is provided.
• Where the employee incurs costs which are related to entertaining a current/potential customer/supplier then any associated input tax incurred will be non-recoverable.


• A Designated Government Entity is able to provide entertainment services to anyone not employed by the entity and shall be able to recover the input tax incurred on those costs.
• Where a VAT registrant who is not a Designated Government Entity provides entertainment services to any non-employee, the VAT incurred on such costs shall be blocked from recovery in full.


• 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
• Where it is a contractual obligation to provide those services or goods to the employees
• Where the provision of goods or services is a deemed supply under the provisions of the Decree-Law

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, the VAT incurred on such costs would be recoverable.
• Where a business organizes a lunch or dinner for employees e.g. a Ramadan Iftar , the VAT incurred on such costs would be blocked from recovery.