UAE Amends the VAT Executive Regulation: Cabinet Decision No. 149 of 2026 Blocks Input Tax on Cash Payments Above Thresholds Still to Be Set, Clarifies Employee Accommodation and Refines Input Tax Apportionment

2026-09-08

On 8 September 2026 the UAE Ministry of Finance announced Cabinet Decision No. 149 of 2026, which amends the Executive Regulation of Federal Decree-Law No. 8 of 2017 on Value Added Tax. The decision touches six areas: input tax will no longer be recoverable on cash payments above thresholds that a separate decision of the Minister of Finance is still to set; the rules on employee accommodation for input tax recovery are clarified; the input tax apportionment methodology is refined, while government entities and charities keep the existing method; the provisions on the supply and import of medical products are updated in line with the revised healthcare legislation; the scope of the Capital Assets Scheme is clarified; and new provisions govern the VAT treatment of a single composite supply according to its economic substance. The Ministry describes the aims as simpler procedures, greater clarity for taxable persons, voluntary compliance, fewer tax disputes and a lower risk of tax evasion. As of the evening of 8 September 2026 neither the text of the decision, nor the cash thresholds, nor an effective date had been published on the websites of the Ministry of Finance or the Federal Tax Authority. This article sets out what was announced, how the rules read today in the consolidated Executive Regulation, what remains open and what a company operating in the UAE should do before the details arrive.

What the Ministry of Finance announced on 8 September 2026

The Ministry’s statement, published in English and Arabic on mof.gov.ae at 17:54 Dubai time and carried the same day by Gulf News, Khaleej Times and Emirates 24|7, lists the following amendments:

• Cash payments. “New provisions restricting the recovery of input tax in case of cash payments exceeding the thresholds to be prescribed in a decision issued by the Minister of Finance.” The Ministry says these measures “are intended to strengthen compliance and mitigate the risks of tax evasion”.
• Employee accommodation. The amendments clarify “the provisions relating to employee accommodation for input tax recovery purposes”.
• Input tax apportionment. The methodology is refined “to more accurately reflect the nature of taxable persons’ economic activities, while retaining the existing methodology applicable to government entities and charities”.
• Medical products. The provisions “governing the supply and import of medical products” are updated “in line with the UAE’s updated legislative framework for the healthcare sector”.
• Capital Assets Scheme. The amendments clarify “the application scope of the Capital Assets Scheme to ensure consistency with the provisions of the VAT Law”.
• Single composite supply. New provisions govern “the VAT treatment of single composite supply in line with the economic substance of the supply”.

The statement frames the package as part of the Ministry’s “ongoing approach in reviewing and enhancing the UAE’s tax legislation” and says the amendments “aim to simplify procedures and provide greater clarity for taxable persons, thereby supporting voluntary compliance and reducing tax disputes”. What the statement does not contain is equally important: no effective date, no list of amended articles, no threshold amounts for cash payments and no date for the Minister’s decision. When we checked the legislation section of tax.gov.ae on the evening of 8 September 2026, the most recent Cabinet Decision listed was No. 137 of 2026 on excise prices, issued on 24 July 2026 and published on 26 August 2026; Decision No. 149 was not yet there, and the VAT page of mof.gov.ae carried no new document either.

The Executive Regulation and its amendments since 2017

VAT was introduced in the UAE on 1 January 2018 at a standard rate of 5%. A business must register when its taxable supplies and imports exceed AED 375,000 and may register voluntarily when they exceed AED 187,500. The law itself is Federal Decree-Law No. 8 of 2017; the detailed rules sit in the Executive Regulation, issued as Cabinet Decision No. 52 of 2017. The consolidated translation published by the Ministry of Finance in October 2025 lists six amending decisions; Decision No. 149 of 2026 becomes the seventh.

The FTA explained the 2024 amendments in Public Clarification VATP040 dated 14 March 2025, about four months after they took effect, and that sequence is the best available guide to how Decision No. 149 will be rolled out: the 2024 decision was issued on 6 September 2024 and took effect on 15 November 2024, ten weeks later. The VAT changes also come at the end of a busy year for federal tax rules: Ministerial Decision No. 133 of 2026 defined who files the Pillar Two information return, and Directive on Tax Transactions No. 3 of 2026, published on 17 July 2026, set the method for converting digital currencies into dirhams for VAT purposes.

Cash payments: what the new restriction does

Today the Executive Regulation ties input tax recovery to a tax invoice and to payment, not to the method of payment. Under Article 54 of the Regulation the recoverable amount in a tax period is the input tax that relates to the part of the consideration paid in that period, and a taxable person is treated as having paid where it intends to pay within six months after the agreed payment date. Nothing in the current text distinguishes a bank transfer from banknotes. Decision No. 149 adds a rule the Regulation has not had before: where a payment is made in cash and exceeds a threshold, the input tax on it cannot be recovered. The threshold itself, and whether it applies per invoice, per supplier or per tax period, will be defined in a decision of the Minister of Finance that had not been issued as of 8 September 2026.

The Ministry’s own explanation is compliance and the risk of tax evasion. Cash leaves no bank record that the Federal Tax Authority can match against a supplier’s output tax, and a supplier paid in cash is harder to check for having declared the sale. The new rule shifts the consequence onto the buyer: a company that pays a large invoice in cash keeps the cost but loses the 5% input tax on it. In practice the restriction rewards companies that run every supplier payment through a corporate bank account, which is also how the UAE e-invoicing system will work: pilot from 1 July 2026, mandatory from 1 January 2027 for businesses with annual revenue above AED 50 million and from 1 July 2027 for the rest, with every invoice reported to the FTA through an Accredited Service Provider. Companies that are still opening their corporate bank account, or that rely on cash for part of their purchases, as is common in construction, hospitality, trading and vehicle-related businesses, have a reason to close that gap before the threshold is announced.

Employee accommodation: the rule as it stands

Article 53 of the Executive Regulation lists the input tax that cannot be recovered. Paragraph (c) of Clause 1 covers goods or services “purchased to be used by employees for no charge to them and for their personal benefit including the provision of entertainment services”, and then names four exceptions: a legal obligation under an applicable labour law of the UAE or a designated zone; a contractual obligation or documented policy to provide the goods or services “in order that they may perform their role”, where it “can be proven to be normal business practice in the course of employing those people”; health insurance for the employee and family members up to a husband or one wife and three children under eighteen, an exception added by Cabinet Decision No. 100 of 2024 with effect from 15 November 2024; and cases where the provision is a deemed supply. The same article defines “entertainment services” as hospitality of any kind, “including the provision of accommodation, food and drinks which are not provided in a normal course of a meeting”.

Housing for staff has therefore lived in a grey zone. Rent of a residential building is exempt from VAT (the first supply is zero-rated and later supplies are exempt, as the FTA explained in Public Clarification VATP003 on labour accommodation), so the input tax question mostly arises on serviced or hotel accommodation, furnishing, maintenance, agency fees and other standard-rated costs of housing employees. Whether those costs pass the test of “normal business practice” has been argued case by case. The Ministry says the amendments clarify these provisions; the statement does not say in which direction. Until the text is published, the safe position is the one the current article already requires: the obligation to house a category of staff should be written into employment contracts or a documented HR policy, and the company should be able to show that housing is normal practice for that role in its sector. Companies that bring staff on employment residence visas and provide accommodation as part of the package are the ones most directly affected.

Input tax apportionment: who is affected

Apportionment matters only for businesses that make both taxable and exempt supplies, or that have non-business activities. Exempt supplies under the VAT Law include specified financial services, residential buildings after the first supply, bare land and local passenger transport. Article 55 of the Executive Regulation sets the standard method: input tax on costs used wholly for taxable supplies is recovered in full; input tax on costs used wholly for exempt supplies or non-business activities is not recovered; residual input tax is recovered in the proportion that recoverable input tax bears to total input tax for the period, rounded to the nearest whole percentage. The calculation is repeated in each tax period, followed by an annual wash-up in the first period of the next tax year. If the difference between the standard result and a calculation based on actual use exceeds AED 250,000 in a tax year, an actual-use adjustment is mandatory; where the tax year is shorter than 12 months the threshold is reduced pro rata. A taxable person may apply to the FTA to use an alternative method from the Authority’s list, may change it only after two tax years, and since 15 November 2024 may apply to use a specified recovery percentage based on the previous year’s rate. The FTA may also oblige a business to apply for a special method, as VATP040 illustrates with a bank that has real estate, retail banking and investment banking sectors.

Decision No. 149 refines this methodology “to more accurately reflect the nature of taxable persons’ economic activities” and keeps the existing method for government entities and charities. Which clauses change is not yet known. Businesses with mixed supplies, above all developers and landlords with residential portfolios, financial institutions, insurers and transport operators, should be ready to re-run their recovery calculations once the text is out, and to check whether an approved special method or a specified recovery percentage remains valid under the new wording.

Medical products: alignment with the 2024 healthcare law

Under Article 41 of the Executive Regulation the supply or import of pharmaceutical products and medical equipment “as specified in a decision issued by the Cabinet” is zero-rated, together with other goods necessary for zero-rated healthcare services. The relevant decision has been Cabinet Decision No. 56 of 2017, which zero-rates medications and medical equipment registered with the Ministry of Health and Prevention or imported with its permission, in force since 1 January 2018. The healthcare framework itself has since been rewritten: Federal Decree-Law No. 38 of 2024 on medical products, the pharmacy profession and pharmaceutical establishments was issued on 1 October 2024, published in the Official Gazette on 14 October 2024 and entered into force on 2 January 2025, replacing Federal Law No. 8 of 2019 and establishing the Emirates Drug Establishment as the regulator. The Ministry’s statement does not name the law, but in our reading this is the “updated legislative framework for the healthcare sector” to which the VAT provisions are being aligned. Importers and distributors of medicines and medical devices, pharmacies, clinics and hospitals should expect the definitions and registration references in the VAT rules to follow the 2024 law and should check that the zero-rating of each product rests on a current registration.

Capital Assets Scheme: scope clarified

The Capital Assets Scheme applies to a single item of business expenditure of AED 5,000,000 or more excluding VAT, on which VAT is payable, with an estimated useful life of at least 10 years for a building or part of a building and 5 years for other assets (Article 57). Staged payments for the purchase, construction, extension, refurbishment or fit-out of a building, or for goods assembled from separately supplied components, are added together for the threshold; stock for resale is excluded. Under Article 58 the input tax on such an asset is monitored for 10 or 5 consecutive years from first use, the owner keeps a capital asset register, and each year the recovery percentage is recalculated and adjusted if the use of the asset shifts between taxable, exempt and non-business purposes. Cabinet Decision No. 100 of 2024 added that for an internally developed asset the first year is the year in which the asset is brought into use. Decision No. 149 clarifies “the application scope” of the scheme “to ensure consistency with the provisions of the VAT Law”. Owners of commercial buildings, hotels, factories, warehouses and large fit-outs are the group to watch the final text, since the scheme decides how much of the VAT on a project above AED 5,000,000 stays recovered over a decade.

Single composite supply: economic substance

Article 4 of the Executive Regulation defines a single composite supply as a supply with a principal component and components that are necessary, essential or ancillary to it, or with elements “so closely linked as to form a single supply which it would be impossible or unnatural to split”. Since 15 November 2024 two further conditions apply: the price of the components is not separately identified or charged, and all components come from a single supplier. Under Article 46 the VAT treatment of a single composite supply follows the principal component; where there is no principal component, it follows the nature of the supply as a whole; where the test fails, each component is taxed separately. This decides, for example, whether a serviced office contract, a training course with materials, equipment sold with installation or freight sold with insurance is one supply at one rate or several supplies at different rates. Decision No. 149 introduces provisions governing the treatment “in line with the economic substance of the supply”. How that wording interacts with the pricing condition added in 2024 is the question tax advisers will ask first; businesses that bundle zero-rated or exempt elements with standard-rated ones, such as healthcare, education, residential real estate and international transport, should review their contracts and invoices once the text is available.

What this means for a company operating in the UAE

1. Cash is about to carry a VAT cost. Any supplier payment above the future threshold made in cash will lose its input tax. Move supplier payments to bank transfers or corporate cards now; if the company has no operating account yet, opening one is the first step, not a formality.
2. Staff housing needs paper. Put the housing obligation into employment contracts or a documented HR policy and keep evidence that it is normal practice for the role. This is what Article 53 requires today and what any clarification will be measured against.
3. Mixed businesses should model the change. Companies with exempt supplies should keep their apportionment workings ready to re-run and check the status of any special method or specified recovery percentage approved by the FTA.
4. Healthcare traders should audit registrations. The zero-rating of medicines and devices should be traceable to a current registration under the 2024 medical products law.
5. Owners of assets above AED 5,000,000 should check their registers. A complete capital asset register with the recovery percentage for each year is the document the FTA will ask for.
6. Bundled offers need a contract review. Where a package mixes rates, the pricing structure and the invoicing of each component should match the intended VAT treatment.
7. Watch two documents. The Minister of Finance decision on cash thresholds and an FTA Public Clarification on Decision No. 149. In 2024 the equivalent decision was issued on 6 September, took effect on 15 November and was explained by the FTA on 14 March 2025.

Autumn 2026 compliance calendar for a UAE company

Checklist: before the cash threshold is announced

• List all supplier payments made in cash over the last 12 months, by supplier and amount.
• Confirm that the company has an operating corporate bank account and that key suppliers accept transfers.
• Collect employment contracts and HR policies that mention housing, transport or other benefits, and check that they are signed and dated.
• Identify exempt or non-business activities and locate the last annual apportionment wash-up.
• For medicines and medical devices, match each zero-rated product to its registration.
• For assets above AED 5,000,000, check that the capital asset register exists and is complete for every year since first use.
• Review bundled contracts where components carry different VAT rates.
• Set a reminder to check the Ministry of Finance and FTA legislation pages for the decision text, the threshold decision and the Public Clarification.

How Atlant Capital Can Help

Atlant Capital registers companies in the UAE, on the mainland and in free zones, and structures the licence so that the activity, the staff and the banking arrangements match the way the business actually operates. We open corporate bank accounts so that supplier payments run through the bank rather than in cash, and we obtain employment residence visas and work permits for owners and staff, including the documentation of housing and other benefits in employment contracts. For VAT registration, returns, apportionment calculations and the review of contracts under the amended Executive Regulation we work with licensed accounting and tax firms from our partner network. Contact us to discuss how the six changes affect your company.

Conclusion

Cabinet Decision No. 149 of 2026 is the seventh amendment to the UAE VAT Executive Regulation in the Ministry of Finance’s consolidated list since 2017, and it introduces something the Regulation has not had before: an input tax consequence for paying in cash. The thresholds, the effective date and the exact wording are still to come, but the direction is clear from the Ministry’s own words: cash above a limit loses input tax, housing for staff gets a defined rule, apportionment moves closer to actual economic activity, medical products follow the 2024 healthcare law, the Capital Assets Scheme is aligned with the law and composite supplies are judged by substance. A company that pays through the bank, documents its employee benefits and keeps its VAT workings current has little to fear from any of the six changes; a company that runs on cash has a limited window to change that before the Minister’s decision arrives.

Sources: Ministry of Finance of the UAE, statement “Ministry of Finance Announces Amendments to the VAT Executive Regulation” of 8 September 2026 (English and Arabic); Gulf News, Khaleej Times and Emirates 24|7 reports of 8 September 2026; Ministry of Finance consolidated unofficial translation of Cabinet Decision No. 52 of 2017 on the Executive Regulation of Federal Decree-Law No. 8 of 2017 and its amendments (October 2025 edition), Articles 4, 41, 46, 53, 54, 55, 57 and 58; Federal Tax Authority Public Clarification VATP040 of 14 March 2025 on Cabinet Decision No. 100 of 2024; FTA Public Clarification VATP003 on labour accommodation; Cabinet Decision No. 56 of 2017 on medications and medical equipment subject to tax at zero rate; Federal Decree-Law No. 38 of 2024 on medical products, the pharmacy profession and pharmaceutical establishments as published by the Ministry of Health and Prevention; Ministry of Finance VAT overview page; FTA legislation page as checked on 8 September 2026.

FAQ

What does Cabinet Decision No. 149 of 2026 change in UAE VAT?

Announced by the Ministry of Finance on 8 September 2026, the decision amends the Executive Regulation of Federal Decree-Law No. 8 of 2017 in six areas: input tax becomes non-recoverable on cash payments above thresholds to be set by the Minister of Finance; the rules on employee accommodation for input tax recovery are clarified; the input tax apportionment methodology is refined while government entities and charities keep the existing method; the provisions on the supply and import of medical products are aligned with the updated healthcare legislation; the scope of the Capital Assets Scheme is clarified; and new provisions govern single composite supplies according to their economic substance. The VAT rate of 5% and the registration thresholds of AED 375,000 and AED 187,500 do not change.

What is the cash payment limit for recovering input VAT in the UAE?

No amount has been published. Cabinet Decision No. 149 of 2026 introduces the restriction in principle, and the thresholds will be prescribed in a separate decision of the Minister of Finance that had not been issued as of 8 September 2026. Until then the current rules apply, under which recovery depends on a valid tax invoice and payment, regardless of the payment method. Businesses that pay suppliers in cash should move those payments to bank transfers now, because the restriction will attach to the payment method once the threshold is set.

Can a UAE company recover VAT on accommodation provided to employees?

Under Article 53 of the Executive Regulation as it stands, input tax on goods or services provided to employees free of charge for their personal benefit is non-recoverable unless there is a legal obligation under UAE or designated zone labour law, a contractual obligation or documented policy needed for the employee to perform the role that is proven to be normal business practice, health insurance within the limits set in 2024, or a deemed supply. Rent of residential property is itself exempt from VAT, so the question mostly concerns serviced accommodation, furnishing, maintenance and similar standard-rated costs. Cabinet Decision No. 149 of 2026 clarifies these provisions; the published text will show the exact conditions.

When do the 2026 VAT Executive Regulation amendments take effect?

The Ministry of Finance statement of 8 September 2026 gives no effective date, and the decision had not appeared on the FTA legislation page by that evening. The previous amendment, Cabinet Decision No. 100 of 2024, was issued on 6 September 2024, took effect on 15 November 2024 and was explained by the FTA in Public Clarification VATP040 on 14 March 2025. Businesses should expect a similar sequence: publication of the text, an effective date some weeks later, a separate decision of the Minister of Finance on the cash thresholds and an FTA clarification.