We give our employees plenty of benefits — which ones can we actually recover VAT on?
My company provides health insurance, a car, meals, and a gym membership to its staff — can I recover VAT on all of these?
UAE employers offer their staff plenty of benefits — health insurance, a company car, subsidised meals, a gym membership — often on the assumption that each one is simply a normal business cost that qualifies for VAT recovery, when in fact recovery on each of these follows a genuinely different rule.
Employee health insurance sits in a somewhat privileged position, since it is a legal obligation in most emirates such as Dubai and Abu Dhabi, not a discretionary benefit the company chooses to offer, and because it is a statutory obligation, the VAT paid on it is generally recoverable.
A company car made available for personal use, subsidised meals, and gym memberships, on the other hand, fall under "a personal benefit given to an employee at no charge" — and VAT on these is not recoverable as a general rule, even where the company genuinely views it as an investment in staff wellbeing, unless it can show it is a documented contractual obligation and an approved policy genuinely necessary for the employee to do the job, such as transport for night-shift staff or a phone plan restricted to work use, in which case limited, conditional recovery becomes possible.
The line between "a discretionary perk the company chooses to give" and "a documented contractual obligation or approved policy" changes the VAT treatment entirely, and it needs to be clear and written down from the start rather than an informal understanding between staff and management — which is one of the first things RASEEKH reviews when setting up a company's benefits policies and employment contracts.