FTA Decision No. 17 of 2026: the six cases for recovering input tax on employee expenses

The rule, and the four exceptions

Where a business buys goods or services that its employees use free of charge for their personal benefit, Article 53(1)(c) of the VAT Executive Regulation blocks recovery of the input tax. Entertainment provided to employees sits within that block.

Four exceptions allow recovery, and they are set in different places.

1. 01

   Labour law

   Providing the benefit is mandatory under labour legislation in the State or any free zone. For accommodation, this applies where MOHRE decisions or directives make it mandatory. Conditions set in Article 53 itself.

2. 02

   Contract or documented policy

   The business has a contractual obligation or a documented policy to provide the benefit. Conditions set in FTA Decision No. 17 of 2026.

3. 03

   Health insurance

   Health insurance for employees and family members, up to one spouse and three children under eighteen. Conditions set in Article 53 itself.

4. 04

   Deemed supply

   The benefit is treated as a deemed supply under the VAT Decree-Law. Conditions set in the VAT Decree-Law.

What Decision No. 17 adds

Decision No. 17 deals with the second exception alone. Article 53 allows a contract or documented policy to qualify in accordance with the cases and conditions specified by the Authority, and Decision No. 17 is where the Authority specifies them. Exceptions 1, 3 and 4 continue to apply on their own terms.

Each case in Decision No. 17 opens with the words “provided that all the following conditions are met”. A case satisfied in part is a case that sits outside the exception.

The six cases

1. 1Transportation

   • Provided between residence and workplace, to clients’ premises, or for other purposes directly related to job duties.
   • Not used for the employee’s personal benefit.
   • The employee is not able to opt to receive a cash allowance or any financial compensation in lieu.

2. 2Food and beverages

   • Residence in a remote, distant or isolated area.
   • Food-preparation services or facilities unavailable at the residence or workplace, as the case may be, with no nearby restaurants or facilities.
   • Directly linked to the work or residence period required due to the job.
   • The employee is not able to opt to receive a cash allowance in lieu.

3. 3Accommodation

   • The employee is not able to opt to receive a cash allowance or financial compensation in lieu.
   • Related to the operational requirements of the work, and does not form part of the employee’s benefits or ordinary compensation arrangements.
   • The work necessitates residence near the workplace, work site or client’s location.
   • Designated exclusively for the employee, excluding family members and other personal use, except where the employee must reside permanently near the workplace so that it is the usual place of residence.
   • Commensurate with job requirements and basic residency needs, with fixtures that do not include significant recreational or personal elements.

4. 4New employees’ accommodation

   • Temporary, for no longer than 30 days.
   • Commensurate with job requirements and basic residency needs.

5. 5Mobile phones, airtime, data and home internet

   • Necessary for job duties, including outside normal hours or away from the workplace, such as remote working.
   • Use limited to work purposes, or personal use incidental and insignificant.
   • A documented internal policy setting permissible use and the consequences of unauthorised use.
   • Reasonable monitoring mechanisms, with records and justifications kept where unauthorised use occurs.

6. 6Parking fees for allocated spaces

   • Incurred solely for business purposes, directly related to job duties or business visits.
   • A documented internal policy on reimbursement cases and the approval mechanism.
   • Payment documents retained, such as receipts showing date, time, amount and Tax paid.

What this asks of an enterprise

The conditions are drafted around things a business does rather than things it concludes: a policy that exists in writing, a benefit the employee receives without a cash alternative, use that stays within defined limits, records retained at the time.

That places the recovery position across three functions at once. HR holds the policy and the terms of the benefit. Finance and the ERP hold the expense categorisation that reaches the tax determination. Tax holds the position and the evidence behind it.

Effective date

Article 3 of Decision No. 17 provides for publication in the Official Gazette and effect from 1 October 2026. Positions taken from that date rest on the cases and conditions it sets.