The UAE VAT Executive Regulations were amended by Cabinet Decision No. 149 of 2026, issued on 1 September 2026 and announced by the Ministry of Finance on 8 September. Most of the changes apply from 1 October 2026. They cover composite supplies, input VAT on employee benefits and accommodation, a new block on recovering VAT on large cash purchases, the "Tax Credit Note" heading, the capital assets scheme, healthcare zero-rating and, from the first tax year starting after 1 October 2027, a new way to apportion input VAT. They follow VAT law and Tax Procedures Law amendments on 1 January 2026 and new penalties on 14 April 2026. For a typical 5–20 person business that makes only standard-rated sales, the work this quarter is short: fix the credit note heading, stop paying large invoices in cash, check staff benefits, and claim any VAT credits that are about to expire. It is general information, not tax advice; confirm your own position with the Federal Tax Authority (FTA) or a registered tax agent.
What is Cabinet Decision No. 149 of 2026?
It is a Cabinet decision that amends the VAT Executive Regulation, which is Cabinet Decision No. 52 of 2017. The Executive Regulation is the detailed rulebook under the VAT law (Federal Decree-Law No. 8 of 2017): it sets the invoice fields, the input VAT conditions, the apportionment method and the capital assets scheme. The Ministry of Finance says the aim is simpler procedures, more clarity and fewer disputes; the cash payment rule is its one anti-evasion measure.
The decision changes the regulation, not the VAT rate. VAT is still 5%, and the registration thresholds of AED 375,000 (mandatory) and AED 187,500 (voluntary) are unchanged. See our UAE VAT registration guide for those.
What changed in the VAT Executive Regulations from 1 October 2026?
Article detail below is from the KPMG and Deloitte alerts, checked against the Ministry of Finance announcement.
| Article | Change | Mainly affects |
|---|---|---|
| Art. 4(6), new | Composite supplies: components that are interconnected and cannot be separated are one supply, taxed like the principal component, even if priced separately | Anyone selling bundles at mixed rates |
| Art. 29(5) | Profit margin scheme: purchase costs count in the margin only if their input VAT is not recoverable | Second-hand goods dealers |
| Art. 41(4) | Healthcare zero-rating: "pharmaceutical products" and "medical equipment" merge into "medical products", to be listed by a Cabinet decision | Pharmacies, clinics, medical suppliers |
| Art. 52(2) | "Outside the State" test: a person present in the UAE for less than 30 days (was "less than a month") and not connected with the supply | Exporters of services |
| Art. 53(1)(c) | Employee benefits: recovery allowed where labour law requires the benefit (now including any free zone); accommodation only where MoHRE requires it; other cases as the FTA specifies | Employers that provide housing or benefits |
| Art. 54(3), new | No input VAT recovery on a supply above a threshold set by the Minister of Finance when paid, or intended to be paid, in cash | Anyone who pays suppliers in cash |
| Art. 55(6)–(7) | Standard apportionment moves from an input-tax ratio to a supply-value ratio | Businesses with both taxable and exempt sales |
| Art. 55(19), new | Government entities and charities keep the input-tax ratio | Government entities, charities |
| Art. 57(1) | Capital asset: "business asset with a cost" replaces "single item of expenditure"; AED 5 million threshold unchanged | Businesses buying assets of AED 5 million or more |
| Art. 60(1)(a) | Credit notes must clearly display the words "Tax Credit Note" | Every VAT-registered business that issues credit notes |
Deadline: 1 October 2026 for everything in the table except the apportionment articles (55(6), 55(7) and 55(19)), which apply from the first tax year that starts after 1 October 2027. Deloitte notes that for a January–December tax year this is 1 January 2028. Check the dates against your own VAT registration.
The cash payment rule
This is the change most likely to reach a small business. If you pay a supplier in cash and the supply is above a value the Minister of Finance will set, you lose the input VAT on it. As of mid-October 2026 that ministerial decision had not been published, according to the Deloitte alert and later commentary, so there is no AED figure yet. The rule itself is in force from 1 October 2026, which means the safe assumption is that a large cash purchase made now may not support a VAT claim once the threshold appears. Pay suppliers by bank transfer or card, and keep the proof of payment with the tax invoice.
Employee accommodation and benefits
Input VAT on staff benefits for private use is blocked, with exceptions that are now narrower. Accommodation counts only when the Ministry of Human Resources and Emiratisation (MoHRE) requires it through a decision or directive. Other benefits qualify where labour law requires them, in mainland or free zones, or in cases and conditions the FTA will specify; Deloitte reads this as covering benefits given under a contract or a documented policy.
The "Tax Credit Note" heading
The old wording of Article 60 referred to the invoice rather than the credit note, which KPMG calls a drafting inconsistency. It now requires the words "Tax Credit Note", clearly displayed. A credit note headed only "Credit Note" does not use the regulation's wording. Our guide to tax credit notes in the UAE and Saudi Arabia lists the other fields.
Who is affected by the new apportionment method?
Apportionment only matters if you make both taxable sales (5% or 0%) and exempt sales, such as residential rent, bare land, local passenger transport or certain financial services. A business that makes only standard-rated sales recovers its input VAT in full and never apportions. That covers most agencies, consultancies, trading companies and service firms with 5–20 staff.
For mixed businesses, the share of shared ("residual") input VAT you can recover changes from an input-tax ratio to a supply-value ratio. Sales of capital assets and reverse-charge purchases are left out of the calculation.
| Method | Formula | Applies |
|---|---|---|
| Old standard method | Recoverable input VAT ÷ (recoverable + non-recoverable input VAT) | Until the new rule starts |
| New standard method | Value of supplies that allow recovery ÷ value of all supplies | First tax year starting after 1 October 2027 |
| Government entities and charities | Input-tax ratio, rounded to the nearest whole number | Same start date |
Worked example (illustrative). A trading company sells AED 800,000 of standard-rated goods and earns AED 200,000 of exempt residential rent from a building it owns. Input VAT directly tied to taxable sales is AED 18,000; input VAT directly tied to the rent is AED 2,000. Shared overheads carry AED 10,000 of residual input VAT.
| Old method | New method | |
|---|---|---|
| Ratio | 18,000 ÷ (18,000 + 2,000) = 90% | 800,000 ÷ (800,000 + 200,000) = 80% |
| Residual VAT recovered | 10,000 × 90% = AED 9,000 | 10,000 × 80% = AED 8,000 |
| Residual VAT lost | AED 1,000 | AED 2,000 |
Here the business recovers AED 1,000 less a year; with other numbers it could recover more. Run your own figures with an adviser in 2027.
What other UAE VAT changes are in force in 2026?
Cabinet Decision 149 is the latest of four sets of changes; the other three are already live.
Federal Decree-Law No. 16 of 2025 (VAT law, from 1 January 2026)
- No more reverse-charge self-invoices. When you import services or goods under the reverse charge, you no longer issue a tax invoice to yourself. You still account for the VAT on the return and must keep the supporting documents, such as the supplier's invoice and the contract.
- Input VAT denied for evasion-linked supplies. The FTA must refuse input VAT where the purchase was part of a supply chain connected to tax evasion and you knew it when you claimed, and DLA Piper reports it may also refuse where you should have known. Basic supplier checks, such as verifying a supplier's TRN on the FTA site, now carry more weight.
- Five-year limit on excess input VAT. Excess recoverable VAT can be carried forward for at most five years from the end of the tax period in which it arose. If it is not used against VAT due, or claimed as a refund, within that time, it lapses.
Federal Decree-Law No. 17 of 2025 (Tax Procedures Law, from 1 January 2026)
The amended Tax Procedures Law applies the same five-year limit to refund requests across federal taxes. It also has a transitional window: if your five years had already run out, or run out during 2026, you can still request the refund before 1 January 2027, according to the commentary from PwC and Andersen. DLA Piper suggests looking at 2021 credits first, since those start to expire during 2026.
Deadline: 31 December 2026 is the last day to request a refund of old VAT credit balances under the transitional rule. Check your FTA account for any credit balance from 2021 or earlier.
Cabinet Decision No. 129 of 2025 (penalties, from 14 April 2026)
The FTA confirmed the new penalty table took effect on 14 April 2026. The changes that matter most for VAT:
| Violation | Penalty from 14 April 2026 |
|---|---|
| Late payment of VAT due | 14% a year, applied monthly (about 1.17% a month) on the unpaid amount; replaces the old compounding 2% and 4% penalties capped at 300% |
| Voluntary disclosure before an audit notice | 1% a month on the tax difference; replaces the 5%–40% scale |
| Voluntary disclosure after an audit notice | 1% a month plus a fixed 15% (was 50%) |
| Failing to issue a tax invoice or tax credit note on time | AED 2,500 per case |
The FTA also said no late payment penalty applies to a voluntary disclosure if the tax is paid within 20 business days of submitting it.
Cabinet Decision No. 100 of 2025 (invoices, ahead of e-invoicing)
This decision amended Articles 59 and 60, the tax invoice and credit note rules, in 2025. Crowe reports it took effect on 29 September 2025. It adds a clause saying that when a tax invoice is issued electronically under the e-invoicing system, several of the paper-era clauses in Article 59 stop applying, including the simplified invoice options, according to adviser commentary. It prepares the rules for e-invoicing rather than changing what a small business prints today. Our UAE tax invoice requirements guide covers today's field list, and the e-invoicing checklist covers what changes in 2027.
What are the key UAE VAT dates for 2025–2028?
| Date | What happens | Source instrument |
|---|---|---|
| 29 Sep 2025 (reported) | Articles 59–60 amended for e-invoicing | Cabinet Decision 100 of 2025 |
| 1 Jan 2026 | No reverse-charge self-invoices; evasion-linked input VAT denial; five-year limit on excess credits and refunds | Federal Decree-Laws 16 and 17 of 2025 |
| 14 Apr 2026 | New penalty table (14% a year late payment, 1% a month on disclosures) | Cabinet Decision 129 of 2025 |
| 1 Sep 2026 | Executive Regulation amendments issued | Cabinet Decision 149 of 2026 |
| 1 Oct 2026 | Composite supplies, cash rule, employee benefits, "Tax Credit Note" heading, capital assets, healthcare, 30-day test in force | Cabinet Decision 149 of 2026 |
| 31 Dec 2026 | Last day to request refunds of old credits under the transitional window | Federal Decree-Law 17 of 2025 |
| 31 Mar 2027 | Businesses under AED 50 million revenue appoint an e-invoicing service provider | Ministerial Decision 244 of 2025, as amended by MD 66 of 2026 |
| 1 Jul 2027 | E-invoicing goes live for businesses under AED 50 million | Same |
| First tax year after 1 Oct 2027 | New supply-value apportionment method | Cabinet Decision 149 of 2026 |
What should a 5–20 person business do this quarter?
Most of the 2026 changes are aimed at larger, mixed or specialised businesses. These are the items that apply to a typical small, fully taxable business between now and the end of 2026.
- Change the credit note heading. Make sure every credit note shows "Tax Credit Note". If your software only prints "Credit Note", ask your provider or add the wording to your template.
- Stop paying large invoices in cash. Move supplier payments to bank transfer or card, and keep proof of payment with each tax invoice. Watch for the Minister of Finance's decision setting the threshold.
- Record how each purchase was paid, so cash purchases are easy to find once the threshold is published.
- Review staff housing and benefits. List the benefits on which you recover input VAT and note the basis for each: a MoHRE requirement for accommodation, a labour law requirement, or a contract or written policy. Stop recovering where none applies.
- Check your VAT credit balance. Log in to EmaraTax and look for any credit from 2021 or earlier. If you have one, request the refund before 31 December 2026.
- Drop reverse-charge self-invoices. Keep the foreign supplier's invoice and the contract instead, and keep reporting the reverse charge on the return.
- Check new suppliers. Verify the TRN of every new VAT-registered supplier and keep a record that you did.
- Correct errors early. A voluntary disclosure before any audit notice now costs 1% a month.
- Check mixed-rate bundles. If a package has 0% or exempt parts, check whether the composite supply rule changes its treatment.
If you also make exempt supplies, add a tenth item for 2027: model the new apportionment ratio with your adviser before your first tax year after 1 October 2027.
From the platform: Staks records how each expense was paid against payment methods you define, such as Cash, Card or Bank Transfer, and shows the method in the expenses list and on each expense. Receipts and invoices can be attached to the expense, so the proof of payment sits next to the purchase when you prepare your return.
When you prepare the next return, our step-by-step guide to filing a UAE VAT return (VAT201) walks through each box.
Frequently asked questions
When does Cabinet Decision 149 of 2026 take effect?
Most of it applies from 1 October 2026. The new apportionment rules for input VAT, and the separate rule for government entities and charities, apply from the first tax year that starts after 1 October 2027, which is 1 January 2028 for a calendar tax year.
What is the cash payment threshold for input VAT in the UAE?
It has not been set yet. Article 54(3) says input VAT cannot be recovered on a supply above a value set by the Minister of Finance when it is paid in cash, but the ministerial decision with the amount had not been published as of mid-October 2026. Pay suppliers by bank transfer or card until it is.
Do I still need to issue a self-invoice for reverse-charge services?
No. Since 1 January 2026, Federal Decree-Law No. 16 of 2025 removed the requirement to issue a tax invoice to yourself for imports under the reverse charge. You still report the VAT on your return and keep the supplier's documents.
Does the new apportionment method affect my business?
Only if you make both taxable and exempt supplies, for example trading sales plus residential rent. A business whose sales are all standard-rated or zero-rated recovers input VAT in full and does not apportion.
Can I still claim old VAT refunds?
Yes, if you act in time. Credits whose five-year period expired before 2026, or expires during 2026, can be claimed under a transitional window that closes before 1 January 2027. After that, excess VAT older than five years lapses.
Keep your VAT records ready for the changes
For the related rules, read our guides to UAE tax invoice requirements, UAE VAT registration, e-invoicing by July 2027 and filing the VAT201 return.
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