Expense Reimbursement Policy (UAE)
EXPENSE REIMBURSEMENT POLICY
[Company Name]
[Policy Version] | Effective: [Effective Date]
This Expense Reimbursement Policy governs the reimbursement of business expenses incurred by employees of [Company Name] in the course of their employment. It is issued under Federal Decree-Law No. 33 of 2021 on Regulation of Labour Relations, Cabinet Resolution No. 1 of 2022, and Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (the UAE Corporate Tax Law). All reimbursements are processed in [Base Currency].
1. PURPOSE AND SCOPE
1.1 Purpose: This policy ensures that employees who incur genuine business expenses in the course of their employment are reimbursed promptly and fairly, while maintaining financial controls that satisfy the requirements of UAE corporate tax, VAT under Federal Decree-Law No. 8 of 2017 (5%), and the UAE Civil Code (Federal Law No. 5 of 1985). Expense reimbursement is distinct from salary and allowances under the employment contract. Reimbursements are not subject to end-of-service gratuity calculations under Article 51 of the Labour Law, and they are not counted as taxable income under Federal Decree-Law No. 47 of 2022 provided they are supported by receipts and incurred wholly for business purposes.
1.2 Scope: This policy applies to all employees of [Company Name] registered with MOHRE (the Ministry of Human Resources and Emiratisation) on mainland UAE contracts. Employees in the DIFC or ADGM should refer to the additional provisions applicable to their employment entity. Consultants, freelancers, and independent contractors may be reimbursed under separate contractual arrangements and are not covered by this policy.
2. ELIGIBLE BUSINESS EXPENSES
2.1 Travel: Reasonable economy-class airfares for approved business travel. Business-class upgrades require prior written approval from [Approval Authority] and must be justified by flight duration or client-facing requirements. Domestic intercity travel by taxi, ride-hailing service, or car rental is reimbursable with receipts. Employees who use personal vehicles for approved business travel may claim mileage at the rate approved by the Finance Department.
2.2 Accommodation: Hotel accommodation up to [Domestic Hotel Limit] per night for domestic travel within the UAE, with prior approval from [Approval Authority]. Hotels in excess of this limit require Finance Director sign-off. The Company is not responsible for personal incidentals, minibar, pay-per-view, or room-service charges beyond the meal allowance in Section 2.3.
2.3 Meals: Meal expenses during approved travel are reimbursable up to [Domestic Meal Allowance] per day for domestic travel and [International Meal Allowance] per day for international travel. Team or client entertainment meals require prior approval, must include a business justification, and must list all attendees. Entertainment meals are subject to separate VAT documentation under Federal Decree-Law No. 8 of 2017.
2.4 Communication: Reasonable roaming charges and data costs incurred for business purposes during approved international travel are reimbursable with supporting documentation. Employees are encouraged to use Company-provided communication solutions where available.
2.5 Other Pre-Approved Expenses: Any other business expense not listed above must be pre-approved in writing by [Approval Authority] before being incurred. Retroactive approval requests are treated as exceptional and may be refused. Examples of common pre-approved categories include conference registration, training fees, and business gifts (subject to the Company Anti-Bribery Policy).
3. NON-REIMBURSABLE EXPENSES
The following are not reimbursable under any circumstances: personal entertainment, alcohol, fines and traffic violations, first-class or business-class airfares without prior approval, personal clothing, gifts to colleagues, political donations, expenses incurred during personal leave days, expenses that exceed the limits in Section 2 without prior approval, and expenses without an original receipt or valid equivalent documentation. Submission of false or inflated expense claims constitutes misconduct under Article 60 of Federal Decree-Law No. 33 of 2021 and may be treated as gross misconduct under Article 44, potentially leading to summary dismissal.
4. SUBMISSION PROCESS
4.1 Deadline: All expense claims must be submitted within [Submission Deadline] of the date the expense was incurred. Claims submitted after this deadline will be refused unless exceptional circumstances are documented and approved by the Finance Director.
4.2 Required Documentation: Each claim must include: (a) the completed Company expense claim form with the date, amount, description, and business purpose for each item; (b) original receipts or equivalent electronic documentation for every item; (c) the applicable VAT invoice for amounts subject to UAE VAT under Federal Decree-Law No. 8 of 2017, where applicable; and (d) for international travel, copies of the boarding passes or itinerary.
4.3 Submission: Completed claims with supporting documents must be submitted to [Finance Contact] at [Finance Email] or through the Company's expense management system. The Finance Department will review the claim for completeness and policy compliance before routing for approval.
4.4 Approval: Claims are approved by [Approval Authority]. Approved claims are processed for payment [Payment Timeline]. Payments are made via the Company's bank account to the employee's registered bank account on the Wages Protection System where applicable.
5. TRAVEL ADVANCES AND CORPORATE CARDS
5.1 Travel Advances: Where an employee anticipates significant travel expenditure, they may request a cash advance through [Finance Email] at least five business days before departure. Advances are reconciled against actual expenses within [Submission Deadline] of return. Any unused advance must be returned within the same period. Unreconciled advances may be deducted from wages in accordance with the employee's written consent and the wage-deduction limits under Article 60 of Federal Decree-Law No. 33 of 2021 (up to 50% of monthly wage for amounts owed to the Company).
5.2 Corporate Credit Cards: Employees issued with a Company credit card must use it exclusively for pre-approved business expenses, reconcile statements monthly, submit receipts for every transaction within 14 days of the statement date, and return the card immediately upon resignation, termination, or request. Personal use of a Company card is a serious disciplinary matter and may be reported to the relevant UAE authority.
6. VAT AND CORPORATE TAX COMPLIANCE
6.1 VAT Recovery: [Company Name] is registered for Value Added Tax under Federal Decree-Law No. 8 of 2017 and seeks to recover input VAT on eligible business expenses. Employees must obtain a proper UAE VAT invoice (showing the supplier's Tax Registration Number, the supply date, and the 5% VAT amount) for any business expense exceeding AED 500. Receipts without a valid VAT invoice cannot be used for input-tax recovery and may reduce the financial benefit of the expense to the Company.
6.2 Corporate Tax: Under Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, genuine employee expense reimbursements supported by receipts and incurred wholly for business purposes are deductible operating costs. The Finance Department maintains records in compliance with the Federal Tax Authority's (FTA) requirements, including a minimum five-year document-retention period.
ACKNOWLEDGMENT
By signing below, I confirm that I have received, read, and understood the [Company Name] Expense Reimbursement Policy ([Policy Version]) and agree to submit only legitimate business expenses supported by proper documentation.
Employee Name: ___________________________ Employee ID: _______________
Signature: _______________________________ Date: _______________
Authorised by [Company Name]: _______________ Date: _______________
Employer (Authorised Signatory)
________________
Signature
Employee
________________
Signature
What Is a Expense Reimbursement Policy (UAE)?
An Expense Reimbursement Policy in the United Arab Emirates is an employer document that defines the rules, limits, and procedures under which employees are reimbursed for legitimate business expenses incurred in the course of their employment. The policy operates at the intersection of employment law under Federal Decree-Law No. 33 of 2021, Value Added Tax obligations under Federal Decree-Law No. 8 of 2017, Corporate Tax requirements under Federal Decree-Law No. 47 of 2022, and financial controls mandated by the UAE Civil Code (Federal Law No. 5 of 1985).
The economic context for a UAE Expense Reimbursement Policy is significant. The UAE introduced VAT at 5% in January 2018 under Federal Decree-Law No. 8 of 2017 and the accompanying Executive Regulations. VAT-registered businesses can recover input tax on genuine business expenses, but only if supported by a valid tax invoice issued by a VAT-registered supplier displaying the supplier's Tax Registration Number (TRN), the taxable amount, and the VAT amount. An Expense Reimbursement Policy that requires employees to obtain proper VAT invoices — rather than ordinary till receipts — directly supports the Company's input-tax recovery position and reduces unrecoverable VAT costs.
Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses introduced a corporate income tax of 9% on UAE-resident businesses earning taxable income above AED 375,000 per year, effective for financial years beginning on or after 1 June 2023. Genuine employee expense reimbursements are deductible operating costs in the Corporate Tax return, provided they are supported by receipts and incurred wholly for business purposes. A well-structured Expense Reimbursement Policy creates the documentation trail — receipts, approval records, business-purpose statements — that the Federal Tax Authority (FTA) requires to validate deductions during a corporate tax audit.
From the employment-law perspective, the Expense Reimbursement Policy clarifies that reimbursements are distinct from wages under Article 1 of Federal Decree-Law No. 33 of 2021 and therefore excluded from the end-of-service gratuity base under Article 51, overtime calculations under Article 19, and Wages Protection System (WPS) requirements under Ministerial Decree No. 788 of 2009. Without this distinction, some employees may argue that habitually-paid 'expense allowances' are in fact part of basic wage, entitling them to higher gratuity and overtime.
The policy also addresses the disciplinary dimension: Article 60 of the Labour Law permits the employer to take disciplinary action for expense fraud or policy breaches, including wage deductions and dismissal. Article 44 allows summary dismissal for deliberate fraud. A signed, communicated Expense Reimbursement Policy gives the employer the documented notice required to rely on these provisions in MOHRE mediations and Federal Labour Court proceedings.
The forms-legal.com UAE Expense Reimbursement Policy template covers all key elements: purpose and scope, eligible expense categories by type (travel, accommodation, meals, communication, other pre-approved), non-reimbursable items, submission process and deadlines, approval hierarchy, travel advances and reconciliation, corporate card rules, VAT invoice requirements under Federal Decree-Law No. 8 of 2017, and Corporate Tax compliance under Federal Decree-Law No. 47 of 2022. The template includes a signed acknowledgment block to confirm that each employee has read and agreed to the policy.
When Do You Need a Expense Reimbursement Policy (UAE)?
A UAE Expense Reimbursement Policy is needed whenever employees regularly incur costs on behalf of the employer, and in several specific legal and operational circumstances described below.
At onboarding, new employees who will travel, entertain clients, or purchase business supplies need clear guidance on what expenses are reimbursable, at what limit, and how to claim reimbursement. Without a policy, employees make assumptions about what the Company will cover, leading to disputes over refused claims and morale problems.
At the start of a UAE VAT registration, the Finance Department needs consistent proof that business expense claims are supported by proper VAT invoices in order to recover input tax. An Expense Reimbursement Policy that makes VAT invoice submission a mandatory part of every claim supports the Company's quarterly VAT return under Federal Decree-Law No. 8 of 2017 and reduces the risk of input-tax adjustments by the Federal Tax Authority.
When the Company becomes subject to UAE Corporate Tax under Federal Decree-Law No. 47 of 2022, a documented expense policy with retention of receipts for five years satisfies the FTA's record-keeping requirements and enables confident deduction of operating costs in the annual tax return.
After any expense fraud incident, the employer needs a written and signed policy to support disciplinary action under Article 60 of Federal Decree-Law No. 33 of 2021. A MOHRE mediator or Federal Labour Court judge will ask whether the employee was on notice of the expense rules and the consequences of breach. A signed acknowledgment is the strongest evidence that they were.
When preparing for a MOHRE establishment inspection under Article 66 of the Labour Law, inspectors may review financial controls and payroll records. An expense policy that clearly distinguishes reimbursements from wages demonstrates sound financial governance and reduces the risk of adverse findings.
When the Company expands internationally or sends employees on overseas assignments, the policy needs to cover foreign-currency conversion, per diem rates for multiple destinations, and the VAT treatment of international business receipts. Updating the Expense Reimbursement Policy before the first international posting avoids expensive ad hoc decisions made under time pressure.
What to Include in Your Expense Reimbursement Policy (UAE)
A UAE Expense Reimbursement Policy compliant with Federal Decree-Law No. 33 of 2021, Federal Decree-Law No. 8 of 2017 (UAE VAT), and Federal Decree-Law No. 47 of 2022 (Corporate Tax) must include the following elements. The forms-legal.com UAE Expense Reimbursement Policy template covers each one.
Purpose and scope must state the company's legal name, the applicable framework (MOHRE mainland / DIFC / ADGM), the categories of worker covered, the base currency (AED), and the foreign-currency conversion methodology. The scope clause should distinguish between employee reimbursements and separate contractor expense arrangements.
Eligible expense categories must be listed with specific daily or per-transaction limits in AED. At minimum: travel (airfares, local transport, mileage), accommodation (per-night hotel limit), meals (domestic and international per diem), business entertainment (with business-purpose requirement and anti-bribery cross-reference), and communication. Other categories should require pre-approval before the expense is incurred.
Non-reimbursable items must be stated clearly, including personal entertainment, alcohol, fines, first-class upgrades without prior approval, and expenses without original receipts. This section is critical for disciplinary purposes: it establishes that the employee was on notice of what the Company will not cover.
Submission process must state the deadline for filing claims (commonly 30 calendar days), the required supporting documentation (expense form plus receipts plus VAT invoices), the approval hierarchy, and the payment timeline after approval. The Federal Tax Authority requires a minimum five-year document retention period.
Travel advances and corporate cards must cover issuance, permitted uses, reconciliation deadlines, and the deduction procedure for unreconciled amounts consistent with Article 60 of the Labour Law.
VAT compliance must require employees to obtain full VAT tax invoices (displaying the supplier's TRN, supply date, taxable amount, and 5% VAT) for all amounts above AED 500, and simplified invoices for smaller amounts, in compliance with Federal Decree-Law No. 8 of 2017.
Corporate Tax compliance must confirm that reimbursements are documented as deductible operating costs under Federal Decree-Law No. 47 of 2022 and that records are retained for five years.
Acknowledgment block must include employee name, ID, signature, and date, plus an authorised Company countersignature.
How to Fill Out Your Expense Reimbursement Policy (UAE)
Completing the UAE Expense Reimbursement Policy template requires the employer to align the policy with its accounting systems, approval hierarchy, and operational reality.
Begin with Company Information. Enter the legal company name as it appears on the trade licence or free-zone certificate. Select the base currency — AED for most mainland UAE employers — and specify how foreign-currency expenses will be converted (Central Bank of the UAE rate on the date of expenditure is the most common and FTA-aligned approach). Enter the effective date and version number.
In the Submission and Approval section, choose the claim submission deadline that fits your payroll cycle. A 30-day deadline is standard; 14 days is stricter but produces faster VAT reconciliation. Select the reimbursement payment timeline: 'with next payroll' is most common and simplest from a systems perspective, while '7 or 14 business days after approval' is better for high-value claims that affect cash flow.
Enter the approval authority in full. 'Direct line manager for claims under AED 5,000; Finance Director for claims above AED 5,000' is a typical tiered structure. The more specific the approval hierarchy, the easier it is to enforce and audit.
In the Spending Limits section, set the domestic meal allowance, international meal allowance, and domestic hotel limit based on your industry and the UAE market. Check the current average hotel and meal costs in the UAE for your employee level — AED 100–200/day for domestic meals and AED 500–800/night for domestic hotels is typical for professional roles in Dubai and Abu Dhabi as of 2026. Set international allowances with reference to the destinations your employees most frequently visit.
Enter the Finance or HR contact name and email accurately. This person will receive all expense claims and must be reachable. An outdated email address will delay reimbursements and create frustration.
Distribute the completed policy to all employees at onboarding and whenever significant changes are made. Collect a signed acknowledgment from each employee and store it in the personnel file. For existing employees, provide two weeks' advance notice before any reduction in reimbursable limits takes effect, as this may constitute a change to working conditions under Article 8 of Federal Decree-Law No. 33 of 2021.
Legal Requirements for Expense Reimbursement Policy (UAE)
Expense Reimbursement Policy (UAE) — Legal Requirements.
Federal Decree-Law No. 33 of 2021 (UAE Labour Law) is the primary employment statute. Article 1 defines 'wage' to exclude expense reimbursements, distinguishing them from the basic salary and allowances on which gratuity (Article 51), overtime (Article 19), and WPS payments (Ministerial Decree No. 788 of 2009) are calculated. Article 60 sets the disciplinary tariff applicable to employees who misuse the expense system, including wage deductions and dismissal. Article 44 permits summary dismissal for deliberate fraud or breach of trust. Article 53 requires all final entitlements, including any salary balance minus documented advances, to be settled within 14 days of the last working day.
Federal Decree-Law No. 8 of 2017 (UAE VAT) requires VAT-registered businesses to hold valid tax invoices to recover input VAT at 5% on business expenses. The FTA's published guide on input tax recovery confirms that expenses without a proper tax invoice are not recoverable. Employees must therefore obtain VAT invoices, not mere till receipts, for all significant business expenditure.
Federal Decree-Law No. 47 of 2022 (UAE Corporate Tax) allows deduction of genuine operating expenses, including employee reimbursements, from taxable income. Records supporting expense deductions must be retained for at least five years per FTA requirements.
Federal Law No. 5 of 1985 (UAE Civil Code) provides the contractual framework under which the employer can recover unreconciled advances and enforce indemnity obligations in the event of loss caused by employee fraud.
Federal Law No. 2 of 2021 on Combating Bribery and Corruption applies to entertainment expenses given to public officials. Employers must ensure that the Expense Reimbursement Policy cross-references the Anti-Bribery Policy and imposes limits on public-sector entertainment.
For DIFC employees, DIFC Employment Law No. 2 of 2019 applies. For ADGM employees, ADGM Employment Regulations 2019 apply. Disputes for mainland employees go to MOHRE for amicable settlement, then to the competent Federal or local Labour Courts.
Common Mistakes to Avoid in Your Expense Reimbursement Policy (UAE)
UAE Expense Reimbursement Policy — Common Mistakes That Create Tax and Legal Exposure.
1. Not requiring VAT invoices. Employees who submit ordinary till receipts without a supplier TRN prevent the Company from recovering input VAT under Federal Decree-Law No. 8 of 2017. Over a full year, unclaimed input VAT on employee expenses can amount to tens of thousands of AED for active businesses. The policy must make VAT invoice submission mandatory for amounts above AED 500.
2. No submission deadline. Without a deadline, employees submit expense claims months after the expenditure, creating accounting period mismatches and FTA audit complications. Set a 30-day deadline and enforce it consistently.
3. Treating regular 'expense allowances' as genuine reimbursements. Fixed monthly 'expense allowances' paid without receipts are reclassified as basic wage by MOHRE mediators and Federal Labour Courts, increasing gratuity and overtime liabilities. Genuine reimbursements must be supported by actual receipts and matched to specific business expenditure.
4. No distinction between reimbursable and non-reimbursable items. Without a clear list of non-reimbursable expenses, employees will claim personal costs in good faith. A refused claim with no policy backing is harder to defend than a refusal based on a signed, specific prohibition.
5. No procedure for unreconciled travel advances. Advances not reconciled within the policy deadline create accounting problems and, if the employee resigns with a balance outstanding, a recovery dispute. The policy must state the reconciliation deadline and the contractual right to deduct from wages, consistent with Article 60 of the Labour Law.
6. Ignoring Anti-Bribery obligations. The UAE's anti-corruption framework under Federal Law No. 2 of 2021 imposes strict limits on gifts and hospitality to public officials. An Expense Reimbursement Policy that does not cross-reference the Anti-Bribery Policy leaves the employer exposed to criminal liability for reimbursed entertainment expenses given to government counterparts.
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Reference this free template in an article, syllabus, or research note:
Forms Legal. (2026). Expense Reimbursement Policy (UAE) (United Arab Emirates) [Legal document template]. Forms Legal. https://forms-legal.com/uae/employment/hr-forms/expense-reimbursement-policy-uae
"Expense Reimbursement Policy (UAE) (United Arab Emirates)." Forms Legal, 2026, https://forms-legal.com/uae/employment/hr-forms/expense-reimbursement-policy-uae.
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author = {{Forms Legal}},
title = {Expense Reimbursement Policy (UAE) (United Arab Emirates)},
year = {2026},
howpublished = {\url{https://forms-legal.com/uae/employment/hr-forms/expense-reimbursement-policy-uae}},
note = {Free legal document template. Based on Federal Decree-Law No. 33 of 2021 (UAE Labour Law) & Federal Decree-Law No. 8 of 2017 (UAE VAT)}
}Frequently Asked Questions
No. Expense reimbursements are not included in the end-of-service gratuity calculation under Article 51 of Federal Decree-Law No. 33 of 2021. Gratuity is calculated exclusively on basic wage — that is, the fixed monthly payment for work performed, excluding housing allowances, transport allowances, and any other variable or cost-recovery payments. Expense reimbursements are not consideration for work; they are a recovery of costs the employee incurred on behalf of the employer, which means they are not 'wages' within the meaning of Article 1 of the Labour Law and do not form part of the gratuity base.
This distinction is important because some employers structure compensation to include a large 'expense allowance' that is treated informally as additional salary but claimed as an expense reimbursement to reduce the gratuity liability. MOHRE mediators and the Federal Labour Courts are alert to this practice. If an allowance is paid regularly, at a fixed amount, without requiring receipts or a business justification, it is likely to be reclassified as basic wage for gratuity purposes. A genuine expense reimbursement must be supported by receipts and matched to specific business expenditure.
For the Wages Protection System (WPS) under Ministerial Decree No. 788 of 2009, only the contracted salary (basic wage plus fixed allowances) must be paid through the WPS. Ad hoc expense reimbursements can be paid separately, though most UAE employers include them in the monthly payroll for convenience. When paid separately, the employer should maintain clear payroll records distinguishing salary from reimbursements, to avoid confusion during MOHRE audits.
For UAE VAT purposes under Federal Decree-Law No. 8 of 2017 and the Executive Regulations issued by the Federal Tax Authority (FTA), an employer registered for VAT can only recover input tax on a business expense if supported by a valid tax invoice issued by a VAT-registered supplier. A valid UAE VAT invoice must contain: the supplier's name and registered address, the supplier's Tax Registration Number (TRN), the invoice date, a sequential invoice number, a description of the goods or services, the quantity and unit price, the taxable amount, the VAT rate (5%), and the VAT amount in AED.
For expenses below AED 10,000, a simplified VAT invoice meeting the FTA's simplified invoice requirements is acceptable. For amounts at or above AED 10,000, a full tax invoice is required. Ordinary till receipts that do not display the supplier's TRN cannot be used for input-tax recovery, which means the Company bears the 5% VAT cost on those items.
From a corporate tax perspective under Federal Decree-Law No. 47 of 2022, genuine employee expense reimbursements are deductible as operating costs in the Company's Corporate Tax return, provided they are incurred wholly for business purposes and supported by receipts. The Federal Tax Authority requires businesses to retain supporting documentation for at least five years from the end of the relevant tax period. An Expense Reimbursement Policy that requires employees to obtain proper VAT invoices and submit them within a fixed deadline is therefore both an HR tool and a tax-compliance mechanism.
Yes, but only within the limits set by Federal Decree-Law No. 33 of 2021. Article 60 of the Labour Law permits wage deductions for amounts owed by the employee to the employer, subject to a cap of 50% of the monthly wage for debts owed to the employer and 25% for debts to third parties assigned to the employer. This means that if an employee has an unreconciled travel advance of AED 10,000 and earns a monthly wage of AED 15,000, the employer can deduct a maximum of AED 7,500 (50%) in a single month, with the remainder recovered in a subsequent month or from the final settlement payment.
For final-settlement payments — which must be made within 14 days of the last working day under Article 53 — the employer can offset the outstanding advance against the total amount owed to the employee (end-of-service gratuity, accrued leave, and unpaid wages). The offset must be clearly documented in the final-settlement statement given to the employee.
The cleanest approach is to require employees to agree in writing, at the time the advance is issued, that any unreconciled amount may be deducted from wages or final settlement. This written consent, combined with the Expense Reimbursement Policy acknowledgment, gives the employer a clear contractual and statutory basis for the deduction and reduces the risk of a dispute escalating to MOHRE or the Federal Labour Courts. Any deduction that is disputed by the employee should be addressed through the internal grievance procedure before resorting to MOHRE mediation.
There is no single statutory per diem rate set by UAE law for private-sector employees. Federal Decree-Law No. 33 of 2021 and Cabinet Resolution No. 1 of 2022 do not prescribe specific travel-allowance amounts. The applicable rates are determined by the employer's written Expense Reimbursement Policy or, where one does not exist, by industry practice and the terms of the individual employment contract.
In practice, UAE private-sector employers typically set domestic per diem rates in the range of AED 100–250 per day for meals, depending on industry and seniority. International per diem rates commonly range from AED 300–600 per day. Government entities and large corporations often use higher rates aligned with the UAE Federal Government's published allowances for public servants, as a reference benchmark for senior staff.
From a VAT perspective under Federal Decree-Law No. 8 of 2017, meal expenses reimbursed at a flat per diem rate rather than against actual receipts are treated as a salary supplement rather than a business expense, which affects input-tax recovery. Employers who want to recover VAT on meal expenses should require actual VAT invoices rather than a flat allowance. From a Corporate Tax perspective under Federal Decree-Law No. 47 of 2022, per diem payments that are documented in the Expense Reimbursement Policy and consistent with the amounts a reasonable business in the industry would pay are generally deductible. Excessive rates with no business justification may be challenged by the Federal Tax Authority.
When employees incur business expenses outside the UAE in currencies other than AED, the employer needs a clear and consistent exchange-rate methodology to convert the foreign-currency amount to AED for payment and accounting purposes. Without a documented methodology, employees may use different conversion rates, creating inconsistencies that complicate VAT recovery and Corporate Tax deductions.
The most common approach is to reimburse at the exchange rate published by the Central Bank of the UAE on the date the expense was incurred or the date the claim was submitted (specified in the Expense Reimbursement Policy). Some employers use the rate on the date the corporate credit card statement was generated, which aligns with the Company's actual cost. The chosen methodology should be stated in the policy and applied consistently.
For VAT purposes under Federal Decree-Law No. 8 of 2017, foreign-currency transactions must be converted to AED using the exchange rate published by the Central Bank of the UAE on the date of the supply. The Federal Tax Authority's published guidance confirms this requirement. Employees travelling internationally should, where possible, obtain VAT invoices in AED or ensure the supplier's invoice clearly states both the foreign-currency amount and the AED equivalent. For Corporate Tax under Federal Decree-Law No. 47 of 2022, the Federal Tax Authority also requires AED figures in the tax return, so consistent foreign-currency conversion at the Central Bank rate is the safest approach to avoid FTA queries during a review.
Client entertainment expenses — meals, event tickets, hospitality — are reimbursable as legitimate business expenses provided they meet the business-purpose test and comply with the Expense Reimbursement Policy. UAE law does not prohibit the reimbursement of client entertainment costs, but several legal requirements apply.
For VAT under Federal Decree-Law No. 8 of 2017, input tax on entertainment expenses where the primary beneficiary is a client or third party rather than the Company itself may be restricted. The FTA's published guidance on blocked input tax includes entertainment expenses that constitute a 'gift' to a non-employee. Employers should obtain legal or tax advice on the VAT treatment of specific entertainment expenditure where amounts are significant.
For Anti-Bribery and Corruption compliance, Federal Law No. 2 of 2021 on Combating Bribery and Corruption in the UAE prohibits gifts, benefits, or hospitality given to public officials to influence their decisions. The Company's Anti-Bribery Policy should set limits on client entertainment values and require disclosure of entertainment given to government employees or public officials. Breaches may constitute a criminal offence.
For Corporate Tax under Federal Decree-Law No. 47 of 2022, entertainment expenses are generally deductible if they have a clear business purpose, are proportionate to the Company's size and the nature of the client relationship, and are supported by documentation (attendee list, business objective, receipt). The Finance Department should maintain a detailed entertainment log for FTA audit purposes. An Expense Reimbursement Policy that requires employees to state the business purpose and list all attendees for every entertainment claim creates the documentation trail needed for both VAT recovery and Corporate Tax deductibility.
Submission of a fraudulent, inflated, or fabricated expense claim is a serious form of workplace misconduct in the UAE. Federal Decree-Law No. 33 of 2021 provides a graduated disciplinary framework under Article 60, ranging from verbal warning to written warning, wage deduction, suspension, and dismissal. For deliberate fraud — where the employee has knowingly submitted false documentation or inflated amounts — the matter may be treated as gross misconduct under Article 44, which permits summary dismissal without notice and without the need to work through the progressive tariff.
Article 44 lists the grounds for summary dismissal without notice, and while it does not explicitly mention expense fraud, the grounds include 'fraud or dishonesty in work' and 'breach of employment contract obligations,' both of which cover deliberate false expense claims. MOHRE mediators and Federal Labour Courts have consistently upheld summary dismissals for proven expense fraud, provided the employer can demonstrate: that the employee was aware of the Expense Reimbursement Policy; that the employer conducted a fair investigation and gave the employee an opportunity to respond before dismissal; and that the false claim was deliberate and not the result of an honest mistake.
In addition to disciplinary action under labour law, the employer may seek civil recovery of the fraudulently obtained amounts through the Federal Courts under the UAE Civil Code (Federal Law No. 5 of 1985), or may file a criminal complaint for fraud under Federal Decree-Law No. 31 of 2021 on Issuance of the Crimes and Penalties Law. For amounts large enough to qualify as embezzlement, the criminal route may be appropriate. Employers should document the investigation thoroughly and obtain legal advice before pursuing criminal charges, as the process is complex and resource-intensive.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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