Ineligible VAT Inputs in Dubai, UAE: What Businesses Must Know to Stay Compliant

📌 In Dubai, VAT ineligibility refers to cases where businesses or individuals are not eligible to claim Input VAT on certain expenses.
Here are the key scenarios where Input VAT is not recoverable:

1️⃣ Non-Deductible Input VAT

The following expenses do not qualify for input VAT recovery under UAE VAT laws:

a) 🍽️ Entertainment Expenses (Article 53 of VAT Executive Regulations)

📍 Any expenses incurred for entertaining clients, employees, or stakeholders, such as:

• 🏨 Hotel accommodation

• 🍷 Meals and drinks

• 🎁 Gifts (above AED 500 per person per year)

• 🎉 Events and leisure activities

b) 🙅‍♂️ Personal & Non-Business Expenses

📍 If an expense is not directly related to taxable business activities, input VAT cannot be claimed.
🔹 Example: Personal travel expenses for business owners.

c) 👨‍⚕️ Employee-Related Expenses (Not Required by Law)

📍 Input VAT is not recoverable on expenses provided to employees unless required by UAE labor law.
🔹 Example: Company-sponsored medical insurance for employees (if not mandatory under UAE law).

d) 🚗 Vehicles Used for Personal & Business Use

📍 VAT cannot be recovered on motor vehicles used for both personal and business purposes.
✅ Exception: If the vehicle is exclusively used for business (e.g., taxis, rental cars, trucks), VAT can be claimed.

2️⃣ Reverse Charge Mechanism (RCM) & Ineligibility

📍 If a company fails to correctly apply RCM for imported services, it may lose eligibility to claim input VAT.

3️⃣ VAT Paid on Exempt Supplies

📍 Businesses involved in exempt supplies (e.g., residential real estate leasing, financial services) cannot recover input VAT related to such transactions.

🔎 Stay informed, stay compliant.
📞 For expert VAT support and compliance guidance in the UAE, connect with AVP Global LLC.

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