Corporate Gifts and UAE VAT: The AED 500 Rule, Tax Invoices and Corporate Tax

Giving goods away for no consideration can be a 'deemed supply' under the UAE VAT law, which means the giver accounts for output VAT as if it had sold them. Business gifts and samples are carved out of that rule when the value given to any one recipient stays at or below AED 500 within a rolling 12-month period, according to the FTA's clarification after the 2023 VAT law amendments, as summarised by advisory firms including Alvarez & Marsal.

There is also an overall relief: published summaries of the same rules say deemed supplies are not taxed where the total output tax on all of a business's deemed supplies stays at or below AED 2,000 in a rolling 12 months. Higher thresholds apply to government entities. Because these figures come from FTA clarifications rather than a single headline rule, check the current FTA guide before you rely on them for a large programme.

Input VAT on goods bought for your business, including branded merchandise and promotional items, is generally recoverable when you hold a valid tax invoice and the goods are used for taxable business purposes. The UAE rules block recovery on certain categories, most notably entertainment services provided to people who are not employees, so a hospitality experience is treated differently from a branded notebook or a water bottle.

The safest workflow is simple: buy from a VAT-registered supplier, make sure the tax invoice is correct, and keep a record of who received what. That record is what lets your finance team prove the AED 500 test later.

A full UAE tax invoice from your gift supplier should carry the words 'Tax Invoice', the supplier's name, address and Tax Registration Number (TRN), your company's name, address and TRN if you are registered, a sequential invoice number, the date, a description of the goods, quantity, unit price, the VAT rate and the VAT amount in AED. If your supplier quotes in another currency, the VAT amount still has to be shown in AED.

Branded orders often include separate lines for set-up, printing or engraving. Those are part of the same supply and carry the same 5% VAT; ask for them as separate lines so procurement can compare quotes line by line.

The UAE's 9% federal corporate tax limits the deduction for entertaining customers, shareholders, suppliers and other business partners to 50% of the cost, according to EY's and PwC's summaries of the Corporate Tax Law. Staff entertainment is generally treated separately and is not capped in the same way.

Whether a branded gift counts as 'entertainment' for that 50% cap is not spelled out the same way by every adviser. A logo-branded item used to promote your company is commonly treated as marketing, while a hospitality-style gift to a client may sit closer to entertainment. Agree the classification with your tax adviser once, then code gift purchases consistently.

Most audit questions about gifts disappear when three things are in place before the order is placed.

Figures in this guide come from the following public sources. Rules change, so always check the latest version.