Blocked input VAT on entertainment and cars

The situation

Input VAT on entertainment for people who are not employees is blocked, as is input VAT on motor vehicles available for personal use.

The law

• Federal Decree-Law 8 of 2017 and Executive Regulation: Blocked input tax on entertainment and private use vehicles

What it means for you

Example: AED 10,000 of client lunches carries AED 500 VAT that you cannot claim. A car used by the owner for business and family has blocked VAT; a delivery van used only for business is recoverable. Code these costs separately in the books.

What to do

1. Create separate ledger codes for entertainment and vehicles.
2. Exclude blocked VAT from the claim.
3. Recover VAT on business-only vehicles with evidence.
4. Review coding each quarter.

Related

• Fixing a past VAT mistake
• Tax invoice timing and penalty
• Reverse charge on foreign software
• Nil VAT return
• Input VAT denied for a fake supplier
• Partial exemption with residential rent