MIDDLE EAST TAX ALERT | UAE | FTA Decision No. 17 of 2026: Cases and Conditions for the Recovery of Input Tax on Employee Expenses
Overview
The Federal Tax Authority (FTA) has issued Decision No. 17 of 2026 on the Cases and Conditions for the Recovery of Input Tax on Employee Expenses. It was issued on September 9, 2026, and takes effect on October 1, 2026. The full text for Decision No. 17 can be found here.
The Decision applies for the purposes of Article 53(1)(c)(2) of the Executive Regulation, which allows recovery of input tax on goods or services provided to employees free of charge where there is a contractual obligation or documented policy to do so. Our September 2026 alert on Cabinet Decision No. 149 of 2026 flagged that this test had been redrafted to remove the previous "normal business practice" wording, with the FTA to specify the relevant cases and conditions separately. The detailed alert can be read here. Decision No. 17 of 2026 now sets out those specific cases and conditions.
What Has Changed
| Before October 1, 2026 | From October 1, 2026 |
| Recovery under the contractual/policy route turned on a general, self-assessed test: was the benefit necessary for the employee to perform their role and was providing it “normal business practice” for that type of employer. | Recovery under the same route now depends on meeting specific conditions prescribed by the FTA for each category of benefit. The previous general ”normal business practice” test has therefore been replaced, for this route, by category-specific conditions. |
Decision No. 17 sets out six categories for which input tax remains recoverable under this route. All conditions within a category must be satisfied; meeting only some of the conditions does not qualify for recovery.
Qualifying Employee Expense Categories
| Category | Key Conditions | Practical Implication |
| Transportation | 1. Transport is provided only for journeys between the employee's home and the workplace, to client sites, or for other purposes connected to their job duties. 2. The transport is not used for the employee's personal purposes. 3. The employee has no option to take a cash allowance in place of the transport. | Businesses should ensure transport policies clearly restrict use to qualifying business-related travel and do not provide a cash alternative. |
| Food and beverages | 1. The employee's home is in a remote or isolated area. 2. There are no cooking facilities or nearby restaurants available to the employee. 3. The food and beverages are provided only during the relevant work or residence period. 4. The employee has no option to take a cash allowance instead. | This is likely to be most relevant to remote-site or camp-based workforces rather than general office catering arrangements. |
| Employee accommodation | 1. The employee has no option to take a cash allowance in place of the accommodation. 2. The accommodation is provided for operational reasons rather than as part of the employee's pay or benefits. 3. The role requires the employee to live close to the workplace, site, or client location. 4. The accommodation is for the employee's own use only, and not for family members, unless it also serves as their usual place of residence. 5. The accommodation is basic and suited to work needs, without significant recreational or personal features. | Businesses providing staff accommodation or labour camps should review whether each arrangement satisfies all the conditions, particularly considering the related changes under Cabinet Decision No. 149. |
| New employee accommodation | 1. The accommodation is provided on a temporary basis for no more than 30 days. 2. The accommodation is basic and appropriate to the employee's role. | Businesses should ensure the 30-day limit is monitored through onboarding or relocation processes. |
| Mobile phone, data, and internet access | 1. The mobile phone, data, or internet connection is needed for the employee to carry out their duties, including work done remotely or outside normal hours. 2. Any personal use of these services is minor and not the main reason they are provided. 3. The employer has a written policy setting out how these services may be used. 4. The employer can show that it monitors use and keeps records where the policy is not followed. | Recovery now depends on business use, supported by appropriate policies and evidence of monitoring. |
| Parking | 1. The parking cost relates only to business travel, client visits, or similar work assignments. 2. The employer has a written policy covering when parking costs will be reimbursed and how this is approved. 3. Receipts are kept showing the date, amount, and VAT paid. | Businesses should confirm that parking reimbursements are supported by both an appropriate policy and sufficient documentary evidence. |
Recommended Immediate Action
Businesses currently recovering VAT on any of the above should map their existing arrangements against the relevant conditions before October 1, 2026, with particular attention to:
- Accommodation and labour camps, given the compounding effect of this Decision and Cabinet Decision No. 149 changes to the labour law route.
- Allowance opt-outs in transport, food, and accommodation policies, which may prevent recovery on the underlying benefit.
- Written usage policies and monitoring evidence for mobile, data, and connectivity benefits, and reimbursement policies for parking.
How Can A&M Help
A&M can support businesses in assessing the impact of Decision No. 17 and preparing for the new requirements, including:
- Reviewing current employee expenses and benefit arrangements to identify potential VAT recovery risks or gaps.
- Supporting businesses in updating relevant policies, processes, and supporting documentation to align with the new conditions.
- Advising on the wider interaction between Decision No. 17, Cabinet Decision No. 149, and existing VAT recovery practices.
