Introduction
On 8 September 2026, the UAE Ministry of Finance announced Cabinet Decision No. (149) of 2026, amending several provisions of the Executive Regulation of Federal Decree-Law No. 8 of 2017 on Value Added Tax (VAT). The amendments introduce changes to several VAT provisions and are relevant to businesses reviewing their VAT accounting, documentation, and compliance procedures. According to the Ministry, the changes are intended to enhance tax transparency, improve implementation efficiency, and align the VAT framework with international best practices.
Key Changes
- Employee accommodation: Amended provisions clarify when input VAT on employee accommodation can be recovered. Accommodation provided to employees is generally excluded from recovery unless it is mandatory under decisions or directives issued by the Ministry of Human Resources and Emiratisation (MOHRE), or is provided under a contractual obligation or documented company policy, subject to conditions set by the Federal Tax Authority.
- Input tax apportionment: The amendments refine the methodology for input tax apportionment to more accurately reflect the nature of a taxable person’s economic activities. The existing methodology continues to apply to Government Entities and Charities.
- Composite supplies: A supply consisting of more than one component will not be treated as multiple supplies where those components are so interconnected, by nature and economic substance, that they cannot be separated. In that case, the supply is treated as a single composite supply, taxed according to its principal component.
- Medical products: Amended provisions concerning the supply and import of specified medical products and certain goods supplied in connection with zero-rated healthcare services.
- Cash payment restrictions: New restrictions on recovering input VAT for supplies above a value paid, or intended to be paid, in cash. The specific threshold and controls will be specified in a separate decision issued by the Minister of Finance and have not yet been published.
- “Outside the State” definition: For the relevant place-of-supply provisions, a person is considered to be outside the UAE if present in the UAE for less than 30 days, provided that presence is not effectively connected with the supply.
- Tax Credit Notes: The amendments confirm that a tax credit note must clearly display the words “Tax Credit Note.”
Effective Dates
- Announcement: 8 September 2026
- Decision issued: 1 September 2026
- General effective date: 1 October 2026
- Input tax apportionment: The amended Clauses 6 and 7 of Article 55, and the new Clause 19 of Article 55, will apply from the first Tax Year commencing after 1 October 2027 — not from a fixed calendar date, but from each taxable person’s next Tax Year that starts after that date.
- Cash payment restriction: The applicable threshold and controls will be specified in a separate decision issued by the Minister of Finance.
What Businesses Should Do
- Review VAT accounting systems, manuals, and internal controls ahead of the 1 October 2026 effective date
- Begin assessing exposure under the revised input tax apportionment rules, particularly for businesses with mixed taxable/exempt income (real estate, financial services, holding structures), ahead of the 1 October 2027 transition
- Review employee accommodation arrangements, employment contracts, internal policies, and supporting documentation to determine whether input VAT recovery conditions are met under the amended rules
- Monitor for the upcoming Ministerial Decision on the cash payment recovery threshold
- Consult with a tax advisor on how these provisions apply to your specific business
Credenza Global Accounting & Bookkeeping L.L.C. helps UAE businesses stay informed about VAT, corporate tax, and other compliance requirements. If you would like to understand how the 2026 VAT Executive Regulation amendments may affect your business, contact our team for a review.