An employee expense reimbursement is the company paying an employee back for a business cost they paid out of their own pocket: a taxi to a client, printer ink, parking, a software subscription on a personal card. In the UAE it is the company's expense, not the employee's income. The company owes the money from the day it was spent and clears the debt when it pays the employee back, either with the next salary or as a separate transfer. To do it well a small business needs four things: a written policy, a receipt for every claim, the right VAT treatment, and a clean entry in the books. This guide covers each one, with a worked example in AED. It is general information, not legal or tax advice.
What counts as a reimbursable business expense?
A reimbursable expense is a cost the employee paid for the company's business, at the company's request or under its policy. The test is simple: would the company have paid this directly if it had been there with its card?
| Usually reimbursed | Usually not reimbursed |
|---|---|
| Taxis, metro and parking for client visits or errands | The daily commute between home and the office |
| Fuel or a per-kilometre rate for business trips in a personal car | Traffic and parking fines |
| Office supplies, small tools, postage and courier fees | Personal meals on a normal working day |
| Client meals and hospitality that a manager approved | Upgrades the policy does not cover (business class, premium hotels) |
| Business travel: flights, hotels, visas for a trip | Personal phone plans, unless the policy says otherwise |
| Software or subscriptions bought for work on a personal card | Gym, clothing, gifts to colleagues |
| Training or exam fees the company agreed to pay | Anything without a receipt |
There is no official UAE per-kilometre rate for private cars. If staff use their own cars, set a rate in your policy and keep a simple log of date, route and kilometres.
Is a reimbursement the same as salary?
No. A reimbursement repays a cost the employee already carried. Salary is pay for work. Keep them apart in your records for three reasons.
- Wages and WPS. Under Ministerial Resolution No. 340 of 2026, in force since 1 June 2026, a month's wages are due on the 1st day of the following month through the Wage Protection System. Reimbursements are generally not part of the contractual wage figure, but practice on whether they go through the WPS salary file varies by bank and agent. Ask your WPS agent how they want reimbursements shown, and keep them on a separate line from basic salary either way.
- End-of-service gratuity. Gratuity is calculated on basic salary. Allowances and one-off payments are excluded. Mixing reimbursements into basic salary inflates the figure you see and confuses the calculation later.
- Fixed allowances are different. A fixed monthly transport or phone allowance written into the contract is part of the employee's pay package. A reimbursement of actual costs against receipts is not. If you pay a flat amount with no receipts, treat it as an allowance, not a reimbursement.
The UAE has no personal income tax, so the employee owes nothing on a reimbursement. The distinction matters for labour records, gratuity and your own books.
What should a simple reimbursement policy say?
Write it on one page and have every employee sign it. A short policy prevents most disputes.
| Policy point | Example wording for a small company |
|---|---|
| What is covered | The items in the left column of the table above |
| Limits | Taxi up to AED 100 per trip; client meals up to AED 150 per person; anything above AED 500 needs approval before it is spent |
| Approval | The employee's manager approves each claim; the owner approves the manager's own claims |
| Receipts | Original receipt or a clear photo for every item; for anything above AED 500 ask the supplier for a tax invoice in the company's name and TRN |
| Deadline to claim | Within 30 days of spending; claims older than 60 days are not paid |
| When it is paid | With the next monthly salary, or by bank transfer within 7 days for amounts above AED 1,000 |
| Currency | Foreign-currency spend is paid back at the AED amount on the employee's card or bank statement |
| What is refused | Fines, personal items, claims without receipts, duplicate claims |
The limits and deadlines above are examples. Set numbers that fit your business and apply them to everyone, including the owner.
What proof do you need for each claim?
Each claim needs four things: what was bought, when, how much, and why. In practice:
- The receipt or tax invoice, original or photo, showing the supplier, date, amount and any VAT.
- The business reason in one line: "Taxi to Emaar site meeting" or "Ink for office printer".
- Approval from the manager, by signature, email or in your software.
- Proof of payment for foreign-currency or online purchases: the card or bank statement line showing the AED amount charged.
Keep everything with your accounting records. UAE VAT records are generally kept for at least five years, and the Corporate Tax Law requires records to be kept for seven years after the end of the tax period they relate to.
Can the company recover VAT on employee-paid expenses?
Sometimes. Input VAT is recoverable when the purchase is for the business's taxable activity, the VAT was actually charged by a UAE VAT-registered supplier, and the company holds a valid tax invoice. When an employee paid, the question is whether the invoice they bring back supports a claim by the company.
| Receipt the employee brings back | VAT recovery for the company |
|---|---|
| Full tax invoice in the company's name with the company's TRN | Generally recoverable, if the cost is for the business |
| Simplified tax invoice (supplier name and TRN, VAT shown, no buyer details) | Simplified tax invoices have been accepted for registered buyers up to AED 10,000; confirm the current rules with your adviser, as invoicing rules are changing with e-invoicing |
| Tax invoice in the employee's personal name | Risky; ask the supplier to reissue it in the company's name, or check with your adviser before claiming |
| Card slip or receipt with no TRN and no VAT shown | Not recoverable |
| Foreign supplier, no UAE VAT charged | Nothing to recover; reverse charge rules may apply to imported services, check with your adviser |
Three rules narrow this further.
Entertainment for non-employees is blocked. Input VAT on entertaining customers, potential customers, officials or shareholders is not recoverable under the VAT Executive Regulations. A client lunch is still a business expense, but the VAT on it stays a cost.
Staff benefits have their own rules since 1 October 2026. FTA Decision No. 17 of 2026, issued 9 September 2026 and effective 1 October 2026, sets the cases and conditions for recovering input VAT on goods and services the company provides to employees free of charge under a contract or documented policy: transport, food and drink, accommodation (including temporary housing for new joiners), mobile and internet, and parking. Each category has its own conditions, such as no cash alternative. This covers benefits, not ordinary out-of-pocket business costs, but if your reimbursements include staff transport, meals or phone bills, read the decision with your adviser.
Cash-paid purchases may lose VAT recovery. Cabinet Decision No. 149 of 2026, which amends the VAT Executive Regulations and took effect 1 October 2026, adds Article 54(3): no input VAT recovery on a supply above a threshold to be set by Ministerial decision where it is paid, or meant to be paid, in cash. As of late October 2026 that threshold has not been published. Until it is, ask staff to pay larger amounts by card and keep the card statement.
Read more on the changes in the 2026 UAE VAT Executive Regulations changes and on invoice fields in UAE tax invoice requirements.
Are reimbursed expenses deductible for corporate tax?
Generally yes, if they pass the normal test. Under Article 28 of the UAE Corporate Tax Law (Federal Decree-Law No. 47 of 2022), an expense is deductible when it is incurred wholly and exclusively for the taxable business and is not capital in nature. Reimbursed costs are the company's costs, so the same rule applies as if the company had paid the supplier directly.
Two limits matter for typical claims:
- Client entertainment is capped at 50% deductible under Article 32. A AED 300 client dinner gives a AED 150 deduction.
- Personal items fail the "wholly and exclusively" test. A receipt with a personal item mixed in should be split, and only the business part reimbursed and deducted.
Ask your tax adviser before relying on a deduction for anything unusual.
Should you pay back through payroll or separately?
Both work. Pick one default and write it in the policy.
| Through payroll | Separate transfer | |
|---|---|---|
| Speed | Once a month, with salary | Any time, usually within a week |
| Admin | One payment per employee per month | One extra transfer per claim batch |
| Records | Reimbursement is a separate line on the payslip | Separate payment reference, no payslip |
| Best for | Small, regular claims | Large one-off amounts such as travel |
| Watch out for | Keep it apart from basic salary; confirm WPS file handling with your agent | Do not let claims sit unpaid for months |
Most small companies pay small claims with salary and large ones separately. Either way, the employee should be able to see exactly which receipts each payment covers.
How do you record an employee reimbursement in the books?
Record the expense on the day it was spent, against a liability account usually called Employee Reimbursements. No cash leaves the company yet. When you pay the employee back, clear the liability against the bank.
| When | Debit | Credit |
|---|---|---|
| Day the employee spends | Expense account (travel, supplies, meals) | Employee Reimbursements (liability) |
| Day the company pays back | Employee Reimbursements (liability) | Bank |
This puts the cost in the right month on your profit and loss, even if you pay back weeks later. The balance on the Employee Reimbursements account at any date is what you owe staff. It should be close to zero after each payroll.
Worked example in AED
Rania, a sales manager in a Dubai trading company, paid for four business costs in October 2026. Basic salary AED 9,000.
| Date | Item | Expense account | AED (incl. any VAT) | Receipt and VAT |
|---|---|---|---|---|
| 6 Oct | Printer ink | Office supplies | 420.00 | Tax invoice in company name, VAT AED 20.00, recoverable |
| 14 Oct | Client lunch, 2 people | Meals and entertainment | 315.00 | Simplified tax invoice, VAT AED 15.00, not recoverable (entertainment) |
| 20 Oct | Parking at client site | Travel | 40.00 | Parking receipt |
| 22 Oct | Design tool, USD 49 at 3.6725 | Software | 179.95 | Foreign supplier, card statement |
| Total owed to Rania | 954.95 |
Each line is posted on its date: debit the expense account, credit Employee Reimbursements. By 31 October the liability is AED 954.95 and the bank has not moved.
Rania's October payroll:
| Payslip line | AED |
|---|---|
| Basic salary | 9,000.00 |
| Reimbursements | 954.95 |
| Net pay | 9,954.95 |
When the payroll is paid, the entry is: debit Salaries AED 9,000.00, debit Employee Reimbursements AED 954.95, credit Bank AED 9,954.95. The liability is back to zero.
If the company is VAT-registered and books VAT separately, the ink is recorded as AED 400.00 to office supplies plus AED 20.00 to input VAT. The lunch stays at AED 315.00 in full, because its VAT is blocked. For corporate tax, only AED 157.50 of the lunch is deductible.
From the platform: On a Staks expense marked Paid, "Paid By" can be Company or Employee. For an employee-paid expense you pick the employee and, if you want, the payroll month to pay them back in ("Pay Back In"), chosen from that employee's recurring payroll months. The status moves from Owed to Added to Payroll, and to Reimbursed automatically when that month's payroll is marked Paid; un-paying or deleting the payroll sends it back. The expense posts debit to its category and credit to the "Employee Reimbursements" liability on the expense date, so the cost is in the P&L that day and no cash moves. When the payroll is paid, the amount sits on the payroll's reimbursements line and posts debit Employee Reimbursements, credit bank. The Payrolls page shows an "Owed to Employees" total, and converting a payroll month pre-fills the queued reimbursements in the payroll currency. The same works in the mobile app and the Claude connector. Two limits: Staks expenses post the gross amount with no VAT split, so recoverable VAT on these receipts needs to be handled separately with your accountant; and Staks does not file to WPS or produce bank salary files. Payroll is on the Scale plan.
Frequently asked questions
How long should an employee wait to be paid back?
We are not aware of a specific legal deadline for reimbursements in UAE labour law; check with your adviser. Set one in your policy, for example with the next salary or within 30 days of an approved claim, and stick to it.
Can we pay reimbursements in cash?
You can, but keep a signed receipt from the employee. Paying the employee in cash is different from the employee paying a supplier in cash: the new Article 54(3) rule is about the original purchase. Bank transfer or payroll leaves the clearest trail.
What if an employee loses the receipt?
Ask the supplier for a copy first. If none is available, some companies accept a signed note with date, supplier, amount and reason, plus the card statement, up to a small limit. No VAT can be recovered without a valid tax invoice.
What about advances given before a trip?
An advance is money the company gives before spending. Record it as an amount the employee owes the company. When they return with receipts, book the expenses against it and settle the difference either way. Do not book the advance as an expense on the day you hand it over.
Related reading
- WPS payroll for small businesses in the UAE
- How to track business expenses in the GCC
- UAE tax invoice requirements
- UAE VAT Executive Regulations changes in 2026
Write the policy, collect a receipt for every claim, book each expense on the day it was spent, and clear what you owe with the next payroll. Start a 14-day free trial of Staks to track what you owe each employee and pay it back through payroll.