VAT on entertainment expenses. What is recoverable?

What are Entertainment expenses

Entertainment is hospitality of any kind including:

• Accommodation

• Food and drinks

• Access to shows or events or trips provided for pleasure or entertainment

Food and drinks “in a normal course of a meeting”

Indicative criteria:

• The hospitality is provided at the business venue

• The hospitality is provided in a short break during the meeting

• Hospitality cost per head does not exceed employee subsistence claim, if there is a policy for that

• The hospitality is not accompanied by a motivational speaker, a music band, or any other form of entertainment

• The hospitality is not substantial that it would constitute and end in itself, and that would encourage people to attend (where no charge is made of attendees)

Catering for conferences and business event

• Where a fee and output VAT is charged, input VAT on catering services is recoverable

• Where no fee is charged, input VAT on catering services cannot be recovered

Sundry office expenses

Input VAT on normal incidental office expenses for general use by both employees and visitors are recoverable such as:

• Tea & coffee; and dates, chocolates or equivalent snacks available in office or during meetings for general use by employees or non-employees for no charge.

• Flowers displayed in office or for decoration during special events

Employees entertainment

Input VAT is not recoverable for:

• Events made specifically for staff entertainment like staff parties unless a charge is made for attendees.

• Free goods or services for employees’ rewards and gifts such as:

1. Long service awards

2. Retirement gifts

3. Eid gifts, or gifts for other festivals or special occasions

4. Gifts given on the occasion of a wedding or birth of a child

5. Employee of the month gifts

6. Dinner to reward service.

Employees expenses & reimbursements

Input VAT is recoverable for employees’ expenses incurred for business purposes such as:

Domestic business trip expenses: accommodation, food and drinks. (provided that it is not related to entertaining a current or potential customer)