On 8 September the Ministry of Finance announced Cabinet Decision 149/2026, which rewrites parts of the VAT Executive Regulation. It lands on the same day as mandatory supplier verification: from October, recovering input VAT requires both a verified supplier and a traceable payment. The cash threshold has not yet been published, and anyone waiting for it before adjusting their procedures may be left with only days to do so.
What happened
On 1 September 2026 the UAE Cabinet issued Cabinet Decision No. 149 of 2026, amending Cabinet Decision 52/2017, the Executive Regulation of Federal Decree-Law 8/2017 on Value Added Tax (VAT). The Ministry of Finance announced it on 8 September in a statement carried by the state news agency WAM. Most of the amendments take effect on 1 October 2026, less than three weeks away. The Ministry's statement lists the areas touched: recovery of input VAT on purchases paid in cash, composite supplies, employee accommodation, the method for apportioning recoverable VAT, the Capital Assets Scheme and medical products. The Ministry also states its reasons: clearer rules, fewer disputes with the tax authority, and fewer openings for evasion. The full text of the decision has not yet appeared on the Ministry's website: the article-by-article details reported here come from readings of the text published by professional sources on 10 and 11 September, and should be re-checked against the official text as soon as it is released.
What changes in practice
Six amendments matter to an operating company. One: the new Article 54(3) provides that VAT paid on a purchase can no longer be recovered where the value of the supply exceeds a threshold to be set by the Minister of Finance in a separate decision and the consideration is paid, or is expected to be paid, in cash. The threshold has not yet been published: the rule has a fixed date and an unknown amount. Two: composite supplies, meaning bundles of goods and services that by their nature and economic substance cannot be separated — advisory plus software, furniture plus installation, a course plus its materials — follow the VAT treatment of the principal component. A bundle can no longer be split so that each element carries the most favourable rate. Three: the decision clarifies when VAT on accommodation provided to employees is recoverable, including where the accommodation is required by the rules of the Ministry of Human Resources and Emiratisation (MoHRE). Four: the input tax apportionment under Article 55, used by businesses making both taxable and exempt supplies, is rewritten: the ratio is calculated as supplies carrying a right to recovery over total supplies, excluding disposals of capital assets and certain reverse-charge transactions, rounded to the nearest whole number. This part starts later: from the first tax year beginning after 1 October 2027, so from 2028 for a calendar-year business. Government entities and charities keep the current method. Five: for the Capital Assets Scheme, the mechanism that spreads input VAT recovery on large capital assets over several years, the threshold of AED 5 million excluding VAT (roughly USD 1.36 million) is confirmed. Six: under the profit margin scheme, the regime for resellers of second-hand goods, used cars and antiques, certain ancillary costs whose VAT is not recoverable now form part of the purchase price; the requirements for credit notes are also updated, the zero rate on medical products is aligned with the new healthcare legislation, and a person is treated as being outside the UAE where present for fewer than 30 days and the presence is unconnected to the supply.
Who it applies to
Every business registered for VAT in the UAE, whether in a free zone or on the mainland: the Executive Regulation applies to all. The cash rule weighs on businesses that pay local suppliers in cash — tradesmen, hauliers, subcontractors, material suppliers — a practice still common in construction, hospitality, events and trading. The composite supply rule concerns anyone selling bundled offerings, typically advisory firms, training companies, fit-out contractors and technology integrators. The new apportionment method affects businesses with mixed activities: a common case is a company letting residential property, which is exempt from VAT, alongside a taxable commercial activity. The employee accommodation rule concerns employers of labour or service staff whose board and lodging is provided by the company.
The exposure
The cash rule does not arrive on its own. From the same 1 October 2026, Federal Tax Authority (FTA) Decision 13/2026 takes effect, requiring buyers to verify the identity and actual place of business of a supplier before recovering input VAT, covered in our update of 22 August. Taken together, the two rules say one thing: from next month an input VAT claim is defended with a verified supplier and a traceable payment, and the invoice alone is no longer enough. A business that continues to pay in cash above the threshold loses recovery on those purchases, and on audit the authority will adjust the claim and apply penalties. The second exposure is time: the cash threshold could be published any day, and a business that waits to learn it before changing its procedures may have twenty days or fewer to do so. The third concerns bundled supplies: a business that has applied different rates to the individual components of a single supply will, from October, be showing the wrong rate on its invoices, and the VAT it failed to charge remains payable to the authority.
What to do now
First, extract from the VAT records of the last twelve months every purchase paid in cash, with the amount of each: it is the only way to know how much input VAT is exposed to the coming threshold, whatever it turns out to be. Second, move supplier payments currently made in cash to bank transfer or corporate card now, without waiting for the threshold: the method of payment is becoming a condition for recovery. Third, list the products and services sold as bundles and determine for each the principal component and its rate, so that October invoices are issued correctly from the start. Fourth, if the company provides staff accommodation, review the VAT treatment of those costs in light of the new rule. Fifth, watch for publication of the ministerial decision on the threshold and of the full text of Cabinet Decision 149/2026 on mof.gov.ae, and file both in the tax records: on audit the inspector will ask which rule the company was applying and from when.
Sources
- https://sharjah24.ae/en/Articles/2026/09/08/a28
- https://gulfnews.com/business/markets/uae-changes-vat-rules-for-cash-payments-staff-housing-and-medical-products-1.500667220
- https://www.vatcalc.com/uae/uae-vat-amendments-1-october-2026/
Published 11 September 2026 on the basis of public sources and official United Arab Emirates instruments. This is not legal or tax advice. Verify your position with a qualified professional before acting.