FTA sets requirements for recovering tax on entertainment services for employees

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The Federal Tax Authority, FTA, has determined the “Entertainment Services” supplied to employees, for which registered businesses cannot recover the taxes they incurred, explaining that these are mainly the expenses associated with activities to entertain personnel, such as staff parties that are free to attend.

The authority noted that according to Federal Decree-Law No. (8) of 2017 on Value Added Tax, VAT, and its Executive Regulations, VAT incurred on goods or services purchased to be given away to staff free of charge, in order to reward them for long service, should be blocked from recovery (unless the business accounts for a deemed supply). Examples of these gifts include long service awards, retirement gifts, Eid gifts, or gifts for other festivals or special occasions, gifts given on the occasion of a wedding or birth of a child; employee of the month gifts, or a dinner to reward service.