A new Article 54(3), introduced by Cabinet Decision No. 149 of 2026, provides that 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 intended to be paid, in cash. It applies from 1 October 2026. The threshold itself will come in a separate Ministerial Decision that has not yet been published.
So the rule exists, the date is fixed, and the number is missing. That is an awkward position to plan around, and it is worth being direct about what it means: you cannot wait for the threshold and then react, because the threshold will apply to purchasing behaviour you already have. The preparation is to understand your cash exposure now.
What the rule says, precisely
Two conditions have to be met together before recovery is denied:
- The value of the supply exceeds the threshold that the Minister of Finance will set; and
- The consideration is paid, or intended to be paid, in cash.
Note the second limb carefully. “Intended to be paid” brings in the arrangement, not just the settlement. A purchase agreed on cash terms is caught even before the money moves. That wording also makes structuring around it — splitting an invoice, part-paying by transfer — a riskier game than it might look, and one we would not advise playing without specific advice.
The threshold is unknown. Anyone giving you a figure today is guessing, and we are not going to add to that. What we can tell you is that the Ministerial Decision will set both the amount and the associated controls, so the mechanics may be tighter than a simple number.
Why this exists
The Ministry of Finance has framed the amendments as strengthening compliance and mitigating tax evasion risk, and this provision is the clearest expression of that. Cash breaks the audit trail. A bank transfer creates a matched record on both sides; cash creates a receipt and a trust exercise.
It also lines up with something else starting the same day. Under FTA Decision No. 13 of 2026, one of the matters you must verify before deducting input tax on any supply is the payment method — and specifically, where cash is used, that there is a documented commercial reason, that the payment sits within the applicable legislative thresholds, and that it can be readily verified.
Read together, the direction of travel is not subtle. Electronic payment is becoming the expected default, and cash is becoming something you have to justify in writing.
Who this actually affects
The instinct is to assume this is about large transactions, and therefore not about you. In our experience that is wrong for a meaningful slice of UAE SMEs. The businesses most exposed are:
| Business type | Where the cash sits |
|---|---|
| Construction and fit-out | Site materials, subcontractor labour, plant hire, petty procurement across multiple sites |
| Restaurants and hospitality | Daily fresh supplies, local markets, casual services |
| Retail and trading | Local wholesalers, one-off stock purchases, transport |
| Logistics and transport | Fuel, repairs, drivers’ disbursements, port and handling charges |
| Any business with site or branch petty cash | Aggregated small purchases that individually look immaterial |
The pattern we see repeatedly is a company that considers itself fully banked, until someone actually runs the report. Petty cash reimbursements, director expense claims settled in cash, and “we paid the supplier directly because it was quicker” add up to more than expected.
What to do in the next two weeks
- Run a cash payables report for the last twelve months. By supplier, by value, by date. If your system cannot produce it, that is itself a finding.
- Rank it by transaction value. You are looking for the shape of the distribution — whether your cash spend is a long tail of small items or a handful of large ones. Those two profiles need completely different responses.
- Identify the suppliers who only take cash and start the conversation now. Moving a supplier onto bank transfer takes weeks, not days, and some will need help opening an account.
- Write the policy before you need it. A simple rule — above value X, electronic payment only, no exceptions without written sign-off — costs nothing to adopt and protects you whatever the threshold turns out to be.
- Attach a commercial explanation to any cash payment that has to happen. Decision No. 13 requires a documented reason; start creating that record now rather than reconstructing it later.
Setting your internal limit conservatively is the sensible hedge. If the published threshold turns out to be higher, you have lost nothing. If it is lower than you guessed, you are already compliant.
The evidence question
Where cash payments remain necessary, the file needs to answer three things: why cash, how much, and how it can be verified.
That means a signed receipt identifying the supplier and their TRN, the tax invoice matched to it, the cash book entry, and a note explaining the commercial reason. Keep them together and keep them for the statutory retention period. A receipt on its own has never been enough, and it is now considerably less than enough.
If you have historically been loose about this, fix it prospectively rather than trying to rebuild the past. Contemporaneous records carry weight; reconstructions do not.
What about payments made before 1 October?
The restriction applies from 1 October 2026. Input tax on supplies before that date is governed by the rules in force at the time, and nothing here reaches backwards.
Two practical wrinkles, though. If your tax period straddles 1 October, split the analysis at the date rather than applying one treatment across the whole return. And if the consideration was intended to be paid in cash under an arrangement made before October but settled afterwards, take advice — the “intended to be paid” wording makes that less obvious than it looks.
Where you have already deducted input tax on a basis that turns out to be wrong, the route to fix it is voluntary disclosure, and doing it before the FTA raises the question is materially better than the alternative.
Our honest read
We do not think this provision is aimed at an SME buying materials from a local supplier. The framing, and its pairing with the supplier verification measures, points at cash being used to obscure a chain rather than at cash being inconvenient.
But intent is not a defence, and a threshold is a threshold. A business that keeps paying meaningful amounts in cash after October is accepting a recovery risk it does not need to accept, for a convenience that is worth less than the tax.
Move what you can onto bank transfer. Document what you cannot. Then wait for the number.
Frequently asked questions
Yes. Paying in cash is not prohibited. What changes from 1 October 2026 is that input VAT cannot be recovered where the value of the supply exceeds a threshold set by the Minister of Finance and the consideration is paid, or intended to be paid, in cash.
It has not been published. Cabinet Decision 149 of 2026 provides for a threshold to be set by a separate Ministerial Decision, which will fix both the amount and the associated controls. Until it appears, the practical reach of the restriction is unknown.
1 October 2026, along with most of the other amendments in Cabinet Decision 149 of 2026. The restriction applies from that date; supplies before it are governed by the previous rules.
Take advice before assuming it does not. The provision is drafted to catch consideration that is paid or intended to be paid in cash, and the controls attached to the threshold have not been published. Structuring a payment to fall below a line you cannot yet see is a poor bet.
Start the conversation now. Where cash genuinely remains necessary, document the commercial reason, keep a receipt identifying the supplier and their TRN, match it to the tax invoice and the cash book entry, and retain the file. FTA Decision 13 of 2026 requires a documented commercial reason for cash payments in any event.
It depends on the value of each supply against the threshold once published. The bigger risk with petty cash is not any single payment but that businesses underestimate the total, so the first step is to run a cash payables report rather than assume.
Yes, and they start on the same day. Under FTA Decision 13 of 2026 you must verify, for each supply, that consideration is paid electronically - and where cash is used, that there is a documented commercial reason, that the payment falls within applicable thresholds, and that it can be readily verified.
Set your own internal limit conservatively and require electronic payment above it. If the published threshold is higher, you have lost nothing. If it is lower than you would have guessed, you are already compliant.
Not sure how much you pay in cash?
We will run the analysis against your ledgers, flag the suppliers who need moving to bank transfer, and draft the payment policy.
