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What expenses are Non-Recoverable (Non-deduction) VAT

  1. If you purchase items for entertaining individuals who are not your employees (such as customers, potential customers, officials, shareholders or investors), you are not eligible for a VAT refund.
  2. If you purchase, rent, or lease a car for your business, but allow someone to use it for personal reasons, then the car and car relative expenses (like fuel, insurance and maintenance) are not eligible for a VAT refund.
  3. If you buy items for your employees unrelated to the business purpose, such as entertainment services, you are generally not eligible for a VAT refund. However, there are some exceptions to this rule. For example, you may be eligible for a refund if the purchase is for legal reasons or if it is part of an employee’s contract or policy. Additionally, some purchases may be considered a “deemed supply” under the Decree Law and could be eligible for a VAT refund.

Here are some additional details to help you understand VAT refunds:

  • “Entertainment services” include hospitality, accommodation, food and drink not part of a normal meeting or business activity. This also includes trips that are intended for leisure purposes.
  • The term “motor vehicle” refers to a car that can transport up to 10 people, including the driver. However, it does not include trucks, forklifts, hoists, or similar vehicles. In other words, the expenses in relation to the trucks, forklifts, hoists or similar vehicles can be recovered for the Input tax.
  • If an airline provides catering and accommodation to passengers who are delayed, this does not qualify as entertainment services and is therefore eligible for a VAT refund.
  • You can receive a VAT refund for a car used for emergency services (such as police or ambulance) and rental purposes. Recoverable expenses include repairs and maintenance, Fuel Expenses, and Rent paid for hiring the above cars.
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