Input VAT you cannot recover in the UAE
The blocked categories — entertainment, personal-use vehicles, employee benefits — where the 5% is a cost, not a claim, and how to keep them out of your VAT return.
Not all input VAT comes back
The default is generous: VAT you pay on costs used to make taxable supplies is recoverable. But the Executive Regulations block recovery on specific categories regardless of how business-related the spend feels — and claiming blocked VAT is one of the easiest findings an FTA audit can make, because it sits in plain sight on the return.
The blocked categories
- Entertainment provided to anyone who is not an employee — client dinners, hospitality, events for customers and partners
- Motor vehicles that are available for personal use — the purchase, lease, fuel and maintenance VAT is blocked unless the vehicle qualifies (taxi, driving school, genuine pool car with no personal use)
- Goods or services purchased for employees' personal benefit free of charge, unless there is a legal or contractual obligation to provide them
The grey zones worth respecting
Staff entertainment has narrow allowances (modest hospitality incidental to business meetings is treated differently from a gala dinner), and 'available for personal use' on vehicles is judged on facts, not on what the logbook says. When a cost sits in a grey zone, the defensible position is to hold the claim until the facts are documented — not to claim first and explain later.
How Orbit applies this
Orbit classifies input VAT per line as recoverable, blocked or conditional, keeps blocked VAT out of the return automatically, and shows the blocked total on its own report — so the cost is visible, but never claimed.
General information for Gulf businesses, not tax advice. Regulations move — verify against the official FTA/ZATCA text or your advisor before acting.