- VAT incurred on any costs which are used for genuine business purpose or is incidental to business purpose shall be recoverable. For example, food and drink provided during meetings, food and drinks purchased by an employee for own consumption during a business trip, and sundry office expenses such as tea and coffee supplies or flowers for display in offices.
- Input VAT is non-recoverable on entertainment expenses incurred for non-employees. For example, customers and potential customers, shareholders and officials (except for certain exceptions).
- Where a business is uncertain whether hospitality is provided in the normal course of the business then it should not recover input VAT.
- For conferences and business events, when a fee is charged, and output VAT is accounted for, Input VAT is recoverable. If no fee is charged, Input VAT is non-recoverable.
- Expenses incurred purely for the entertainment of employees such as Staff dinner, and Ramadan Iftar, etc. and free of cost goods and services as rewards are not recoverable unless the employee is charged for the same.
- If there is a legal obligation to provide those goods or services under the applicable UAE labour law to employees or a contractual obligation to provide the same to the employees in order for them to perform their role then VAT may be recoverable.

UNDERSTANDING VAT ON ENTERTAINMENT EXPENSES
The Federal Tax Authority (“FTA”) issued a Public Clarification Article 52 of Cabinet Decision no. (52) of 2017 on the Executive Regulation of the Federal Decree-Law No. (8) of 2017 on VAT.Entertainment has been defined as hospitality of any kind, including the provision of accommodation, food and drinks not provided in the normal course of a business meeting, and access to events or trips.When the hospitality provided becomes an end in itself, such costs are considered to be entertainment, and are not recoverable.It is worth noting that: