The UAE has introduced another set of changes to its VAT framework, with businesses facing new rules around cash payments, employee accommodation, medical products, input tax apportionment and composite supplies. The changes come through Cabinet Decision No. 149 of 2026, which amends parts of the Executive Regulation of Federal Decree-Law No. 8 of 2017 on Value Added Tax.
Announced by the UAE Ministry of Finance on September 8, the amendments are designed to improve tax transparency, simplify procedures, strengthen compliance and bring the VAT framework closer to international practices.
For businesses, however, one change stands out: input VAT recovery will be restricted for certain supplies paid for in cash once the transaction exceeds a threshold that will be announced separately by the Minister of Finance.
Here is what UAE businesses need to know.
What Is Changing Under The New UAE VAT Rules?
Cabinet Decision No. 149 introduces several amendments to the UAE VAT Executive Regulation.
The changes cover:
- Cash payments and input VAT recovery
- Employee accommodation
- Medical products
- Capital Assets Scheme
- Input tax apportionment
- Single composite supplies
The Ministry of Finance says the changes are intended to provide greater clarity for taxable businesses, encourage voluntary compliance and reduce VAT disputes.
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New Restriction On Input VAT For Large Cash Payments
One of the most important changes concerns businesses that pay for supplies in cash. Under the amended rules, input VAT recovery can be restricted where consideration for a supply is paid, or intended to be paid, in cash and the value exceeds a threshold to be specified by the Minister of Finance. The exact threshold has not yet been announced.
This means businesses should not assume that every cash transaction will suddenly become non-recoverable. The restriction will apply once the transaction meets the conditions and threshold established in the forthcoming Ministerial decision. The Ministry says the measure is intended to strengthen compliance and reduce the risk of tax evasion.
What Does This Mean For Businesses?
Businesses that regularly make large cash payments should pay particular attention to this change.
Once the threshold and detailed controls are announced, companies may need to review:
- How large purchases are paid for
- Internal payment approval procedures
- VAT documentation
- Accounting and bookkeeping processes
- Input VAT recovery procedures
- Whether certain suppliers should be paid through traceable electronic or banking channels
For now, businesses should wait for the Minister of Finance’s decision before assuming a specific cash-value limit.
When Does The Cash Payment Rule Take Effect?
The broader amendments under Cabinet Decision No. 149 are scheduled to take effect from October 1, 2026, with the exception of the revised input tax apportionment methodology, which has a later implementation date.
The specific cash-payment threshold and controls will be set through a separate decision from the Minister of Finance. This distinction is important because the Cabinet decision creates the framework for the restriction, but the amount that triggers it has not yet been specified.
Employee Accommodation Gets More Clarity
The amendments also address the treatment of employee benefits and accommodation for input VAT recovery purposes. The Ministry says the changes clarify the provisions relating to employee accommodation. The amended framework introduces more structured conditions around input tax recovery for employee benefits, including changes concerning employer-provided accommodation.
For companies providing staff housing, this means existing VAT recovery procedures should be reviewed rather than assuming previous treatment will automatically continue unchanged. Businesses with significant employee accommodation expenses should examine the revised provisions with their tax advisers before applying the new rules.
Medical Product VAT Rules Have Been Updated
The Executive Regulation has also been updated to reflect changes in the UAE’s healthcare legislation. The amendments cover the supply and import of medical products, bringing the VAT rules into line with the UAE’s updated legislative framework for the healthcare sector.
This is particularly relevant for businesses involved in the import, distribution or supply of medical products, which may need to review how the updated definitions and requirements affect their VAT treatment.
Capital Assets Scheme Rules Clarified
Another amendment concerns the Capital Assets Scheme. The Ministry says the changes clarify the scheme’s application so that it is consistent with the provisions of the UAE VAT Law. The Capital Assets Scheme is important for businesses that acquire significant assets because VAT recovery can be subject to adjustments over the relevant monitoring period.
The clarification should help businesses apply the scheme more consistently and reduce uncertainty when dealing with qualifying capital assets.
Input Tax Apportionment Is Changing
Businesses that make both taxable and exempt supplies may need to pay close attention to the changes to input tax apportionment. The UAE has refined the methodology used to determine how input VAT should be allocated, with the aim of making the calculation better reflect the nature of a taxable person’s economic activities.
However, this particular change does not follow the same immediate timeline as the other amendments.
According to tax advisers reviewing the decision, the revised methodology applies from the first tax year commencing after October 1, 2027, while government entities and charities retain their existing methodology. That gives affected businesses additional time to assess how the new calculation could affect their VAT recovery.
New Rules For Composite Supplies
The amendments also introduce provisions dealing with single composite supplies. A composite supply is essentially a transaction involving several elements that are supplied together as one economic transaction. The new rules are designed to determine the VAT treatment based more closely on the economic substance of the overall supply, rather than simply treating every individual component as an entirely separate transaction.
This could be particularly relevant to businesses that sell bundled products or services. Companies should therefore review how they currently classify bundled transactions and whether the amended provisions could change their VAT treatment.
Why Has The UAE Updated Its VAT Rules?
The Ministry of Finance says the amendments form part of its ongoing review of the UAE’s tax legislation.
The objective is not simply to introduce additional restrictions. The Ministry says the changes are intended to:
- Improve tax transparency
- Make VAT procedures clearer
- Strengthen voluntary compliance
- Reduce tax disputes
- Improve the efficiency of VAT implementation
- Align the UAE’s tax system with international best practices
- Reduce the risk of tax evasion
The latest changes therefore form part of a broader effort to keep the UAE’s tax framework aligned with the country’s evolving economy and legislation.
What Should UAE Businesses Do Now?
Businesses do not need to panic, but they should start reviewing their VAT processes.
1. Review Cash Payment Procedures
If your business makes significant cash purchases, keep track of these transactions and monitor the forthcoming Ministerial decision setting the threshold.
2. Review Employee Accommodation
Companies providing accommodation or other benefits to employees should review their VAT recovery treatment under the amended rules.
3. Check Bundled Products And Services
If your business sells packages or bundled services, examine whether the new composite-supply provisions affect how VAT is applied.
4. Review Input VAT Apportionment
Businesses making both taxable and exempt supplies should start assessing how the revised apportionment methodology could affect future VAT recovery.
5. Keep Documentation In Order
Invoices, payment records and supporting documentation remain critical to VAT compliance. Businesses should make sure their accounting systems can properly distinguish cash and non-cash transactions and maintain the records needed to support input VAT claims.
UAE VAT Amendments: Quick Summary
| Change | What It Means |
| Cash payments | Input VAT recovery can be restricted for qualifying cash-paid supplies above a threshold to be announced |
| Employee accommodation | Input VAT recovery rules have been clarified |
| Medical products | Supply and import provisions updated |
| Capital Assets Scheme | Application clarified |
| Input tax apportionment | Methodology refined; new approach applies from the first tax year beginning after October 1, 2027 |
| Composite supplies | New rules address VAT treatment of single composite supplies |
| Main effective date | October 1, 2026, except specified provisions with later application |
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What Businesses Should Watch Next
The biggest unanswered question for businesses is the cash-payment threshold. The Cabinet decision establishes the restriction, but the specific threshold and controls are still expected to be set through a separate decision by the Minister of Finance.
Until that decision is issued, businesses should avoid assuming that a particular cash amount is already prohibited from input VAT recovery. The UAE Ministry of Finance has published Cabinet Decision No. 149 of 2026 in its financial legislation database, where businesses can also follow the latest tax legislation.
The Bottom Line
The latest UAE VAT amendments are significant, but they are not simply a blanket crackdown on businesses. The changes combine new compliance measures with greater clarity around several technical areas of VAT, including employee accommodation, medical products, capital assets, input tax apportionment and composite supplies.
For most businesses, the immediate priority should be understanding the new requirements that take effect from October 1, 2026 and preparing for the forthcoming decision on cash-payment thresholds. If your company makes large cash purchases, provides employee accommodation, handles medical products or regularly makes bundled supplies, this is a particularly good time to review your VAT procedures with a qualified tax professional.
As the UAE continues to refine its tax framework, keeping up with these changes will be essential for businesses that want to avoid compliance issues and protect their ability to recover legitimate input VAT.
