Cabinet Decision No. 149 of 2026 amends the Executive Regulation of the UAE VAT law. It was issued on 1 September 2026, announced by the Ministry of Finance on 8 September, and most of it takes effect on 1 October 2026. The headline changes are a restriction on recovering input tax when you pay in cash, a new statutory rule for single composite supplies, a tighter position on employee accommodation, and a reworked input tax apportionment method that does not bite until 2027.
Three weeks is not much notice for a change to input tax recovery. If you only read one section of this guide, make it the one on cash payments — and then read our separate guide to the supplier verification rules, which start on the same day under a different instrument and will take most finance teams longer to implement.
What changed, in one table
| Area | What it does | From |
|---|---|---|
| Cash payments (new Article 54(3)) | Input tax cannot be recovered where the supply exceeds a threshold and the consideration is paid, or intended to be paid, in cash | 1 Oct 2026, but the threshold is not set yet |
| Single composite supply | Where components are interconnected and cannot realistically be separated, the whole transaction is taxed as one supply, following the principal component | 1 Oct 2026 |
| Employee accommodation | Input tax on staff accommodation is restricted unless the accommodation is mandatory under Ministry of Human Resources and Emiratisation rules | 1 Oct 2026 |
| Input tax apportionment (Article 55) | New method: qualifying supplies over total supplies, excluding capital asset disposals and certain reverse charge transactions, rounded to a whole number | First tax year starting after 1 Oct 2027 |
| Capital Assets Scheme | Scope clarified, with the AED 5 million VAT-exclusive threshold confirmed | 1 Oct 2026 |
| Profit margin scheme | “Purchase price” revised to include certain purchase-related costs and fees where their input tax is not recoverable | 1 Oct 2026 |
| Medical products | Zero-rating provisions updated to match the UAE’s revised healthcare legislation | 1 Oct 2026 |
| “Outside the UAE” test | A person may be treated as outside the UAE where present for fewer than 30 days and that presence is not effectively connected with the supply | 1 Oct 2026 |
| Tax credit notes | Requirements updated | 1 Oct 2026 |
Paying a supplier in cash can now cost you the input tax
This is the change with the widest reach and the least detail attached to it.
A new Article 54(3) says input tax may not be recovered where the value of a supply exceeds a threshold set by the Minister of Finance and the consideration is paid, or is intended to be paid, in cash. The method of payment becomes a condition of recovery on higher-value purchases.
The threshold has not been published. A separate Ministerial Decision will set both the amount and the controls around it. Until that lands, nobody — including us — can tell you where the line falls. Anyone quoting you a figure today is guessing.
What you can do now is find out how much of your payables actually settles in cash, and at what values. In most UAE SMEs the honest answer is more than the finance team expects, particularly for petty procurement, contractors and site expenses. Our full guide to the cash payment input VAT restriction covers how to run that review.
Bundled supplies now follow the principal component
The UAE has had a working concept of composite supply for years, but it sat in guidance rather than in the Regulation. It is now written down.
Where several components are interconnected and cannot realistically be separated, judged on the nature and economic substance of the transaction, you may not treat them as separate supplies. The transaction is one composite supply, and its VAT treatment follows the principal component.
That matters most where the components would be taxed differently. A zero-rated item bundled with a standard-rated service, a delivery charge attached to an export, an installation fee on exempt equipment — those are the transactions to look at. If you have been splitting an invoice to preserve a zero rate on part of it, the split now needs to survive a substance test.
It cuts the other way too. Businesses that have been standard-rating everything in a bundle out of caution may be overcharging, and a composite supply whose principal component is zero-rated follows the principal component.
Staff accommodation: the MOHRE line
Accommodation an employer provides to employees is now excluded from recoverable input tax unless providing it is mandatory under decisions or directives issued by the Ministry of Human Resources and Emiratisation.
For construction, logistics, hospitality and manufacturing businesses housing labour under MOHRE requirements, that is a carve-out worth documenting properly. For companies providing accommodation as a benefit — a villa for a senior hire, an apartment for a relocating manager — it points the other way.
The practical work is evidential: can you show which category each unit falls into? We have set that out in the guide to employee accommodation and input VAT.
Input tax apportionment, reworked — but not yet
If you make both taxable and exempt supplies, the method for splitting residual input tax changes. You calculate the proportion of qualifying supplies against total supplies, excluding specified items including capital asset disposals and certain reverse charge transactions, round the result to the nearest whole number, and apply it to residual input tax. Government entities and charities keep a separate calculation based on recoverable input tax over total input tax.
These provisions have a long lead time: they apply from the first tax year commencing after 1 October 2027. So this is a 2027 planning item, not an October one. We flag it now because the businesses affected — property, financial services, anyone with a mixed supply profile — usually need a full year to model the impact and change the working papers.
The exclusion of capital asset disposals is the detail to note. A one-off property or equipment sale could previously distort the ratio badly in either direction. Taking it out of the calculation is a sensible fix, and it changes the answer for anyone who has had a lumpy year.
The rest of it
Capital Assets Scheme. Scope clarified for consistency with the VAT Law, with the AED 5 million VAT-exclusive threshold confirmed. If you hold assets near that line, check whether your fixed asset register actually flags them and whether the adjustment periods are being tracked. In our experience the scheme is more often ignored than applied wrongly.
Profit margin scheme. The definition of purchase price now picks up certain purchase-related costs and fees where their input tax is not recoverable. Used goods dealers, second-hand vehicle traders and anyone running the margin scheme should recalculate on the new basis rather than assuming continuity.
Medical products. Zero-rating provisions updated to sit alongside the UAE’s revised healthcare framework. Relevant if you import, distribute or supply medical goods.
The 30-day presence test. A person may be considered outside the UAE where they are present here for fewer than 30 days and that presence is not effectively connected with the supply. This is a useful clarification for exporters of services, and it pairs with the fixed establishment point the FTA made in VATP046 — read them together, because they pull in opposite directions.
Tax credit notes. Requirements updated. Worth a read against your current templates and your process for issuing credit and debit notes.
What to do before 1 October
- Run a cash payables report for the last twelve months, by supplier and by value. You need to know your exposure before the threshold is announced, not after.
- List your bundled products and services and identify which ones mix VAT treatments. Those are the composite supply exposures.
- Split your accommodation costs between MOHRE-mandated and discretionary, and find the documents that prove which is which.
- Read the supplier verification rules separately. They start the same day, under FTA Decision No. 13 of 2026, and they are a bigger operational change than anything in Cabinet Decision 149. See the verification guide.
- Diarise the apportionment change for your first tax year after 1 October 2027 if you make exempt supplies.
- Check your next return covers the transition properly if your tax period straddles 1 October.
If your VAT position has not been reviewed end to end recently, this is a reasonable moment for a VAT health check — four separate recovery rules changed at once, and they interact.
What we do not know yet
Two open items, and we would rather name them than write around them.
The cash payment threshold has not been set. Until the Ministerial Decision appears, the practical reach of Article 54(3) is unknown — it could catch routine procurement or only large settlements.
The interaction between the composite supply rule and existing FTA positions on specific bundles has not been tested. Where you hold a private clarification on a bundled supply, that clarification was given against the old wording. Our guide to how FTA guidance actually binds you explains why that matters more than people assume.
Where a position is genuinely uncertain, document the reasoning you relied on at the time. That contemporaneous note is what protects you if the answer later turns out to be different.
Frequently asked questions
It is the decision amending the Executive Regulation of the UAE VAT law. It was issued on 1 September 2026 and announced by the Ministry of Finance on 8 September 2026. Most of its provisions take effect on 1 October 2026.
Most changes apply from 1 October 2026. The revised input tax apportionment provisions under Article 55 have a longer lead time and apply from the first tax year commencing after 1 October 2027.
Only below a threshold that has not yet been published. New Article 54(3) blocks recovery where the value of a supply exceeds a threshold set by the Minister of Finance and the consideration is paid, or intended to be paid, in cash. A separate Ministerial Decision will set the amount and the controls.
Where several components are interconnected and cannot realistically be separated, judged on the nature and economic substance of the transaction, they are treated as one supply rather than several. The VAT treatment of the whole follows the principal component.
Employee accommodation is excluded from recoverable input tax unless providing it is mandatory under decisions or directives issued by the Ministry of Human Resources and Emiratisation. The practical issue is evidencing which of your accommodation falls into which category.
AED 5 million excluding VAT, confirmed by the amendments. The scope of the scheme has also been clarified for consistency with the VAT Law.
No. The standard rate remains 5%. These are technical amendments to the Executive Regulation covering recovery, apportionment, composite supplies and specific sectors. Nothing in them changes rates or registration thresholds.
Run a report of what you paid in cash over the last twelve months, by supplier and value. That is the one exposure you cannot size later, because the threshold will be announced with little notice and will apply to how you already operate.
Not sure which of these hit you?
Send us your last four VAT returns and a supplier list. We will tell you which of the October changes actually touch your business, and what needs doing first.
