UAE VAT Supplier Verification Rules 2026 — New FTA Requirements

From 1 October 2026, UAE businesses can recover input VAT on certain employee-related expenses under new conditions introduced by the Federal Tax Authority (FTA).

Under FTA Decision No. 17 of 2026, businesses may recover VAT incurred on employee transport, accommodation, food, telecommunications and parking, provided specific requirements are met.

The decision clarifies when employee benefits qualify as legitimate business expenses for VAT recovery. However, eligibility depends on the nature of the expense, its business purpose and the supporting documentation.

The new rules cover six categories of employee-related expenses.

1. Employee Transport

Businesses may recover VAT on transport provided between employees’ homes and workplaces, clients’ premises or other work-related locations.

However, transport must serve a genuine business purpose, and employees cannot receive a cash allowance instead.

2. Food and Beverages

VAT recovery is permitted in limited circumstances where employees work or reside in remote locations without reasonable access to food preparation facilities or nearby restaurants.

The provision must be directly connected to employment requirements, with no alternative cash compensation.

3. Employee Accommodation

Accommodation may qualify when operational requirements make it necessary for employees to live near their workplace, project site or client’s premises.

The accommodation must be appropriate for the job and cannot simply form part of an employee’s standard compensation package.

4. Temporary Accommodation for New Employees

Businesses may recover VAT on temporary accommodation provided to newly recruited employees for up to 30 days, subject to the conditions established by the FTA.

5. Mobile Phones and Internet

VAT on employee mobile phones, data packages and internet services may be recoverable when these are necessary for work.

Employers must establish documented usage policies, monitor compliance and ensure personal use remains incidental and insignificant.

6. Business-Related Parking

VAT recovery is permitted for parking expenses directly connected to business activities, including client visits and work assignments.

Businesses must maintain appropriate approval procedures and supporting payment records.

The new rules provide greater clarity on employee-related VAT recovery. However, not every employee benefit automatically qualifies for a VAT deduction.

To support eligible claims, businesses should:

• Review existing employee benefits and expense policies.
• Identify expenses that meet the new VAT recovery conditions.
• Establish clear internal policies and approval procedures.
• Maintain valid tax invoices, receipts and supporting documentation.
• Review VAT reporting procedures to ensure accurate input tax recovery.

Importantly, businesses should distinguish between expenses incurred for operational purposes and benefits provided primarily for employees’ personal use.

These changes follow another important regulatory development.

Under FTA Decision No. 13 of 2026, businesses must also comply with new supplier and transaction verification requirements when recovering input VAT.

Together, the two decisions place greater emphasis on documented business purposes, transaction verification and internal VAT compliance procedures.

Read our previous article: UAE VAT Supplier Verification Rules 2026 — New FTA Requirements.

The latest VAT updates highlight the importance of maintaining accurate financial records, reviewing internal procedures and ensuring that input tax claims meet FTA requirements.

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We offer cost-effective accounting and tax compliance packages tailored to businesses of all sizes, from startups and SMEs to established companies operating across the UAE.

Whether you need a review of your existing VAT procedures or ongoing accounting and tax support, our team can help you maintain compliance while reducing administrative costs.

Stay compliant. Optimise your tax processes. Focus on growing your business.