On 8 September 2026 the UAE Ministry of Finance (MoF) announced the adoption of Cabinet Decision No. 149 of 2026, amending the Executive Regulation of Federal Decree-Law No. 8 of 2017 on Value Added Tax. The decision was adopted on 1 September 2026 and takes general effect on 1 October 2026 — with one exception: the revised input-tax apportionment methodology under Article 55 applies only from the first Tax Year commencing after 1 October 2027. Six areas are affected — from single composite supply and cash-payment input-tax recovery to employee accommodation, medical products and the Capital Assets Scheme.
At a glance: the six areas amended
The MoF frames the update as designed to «simplify procedures and provide greater clarity for taxable persons, thereby supporting voluntary compliance and reducing tax disputes». CD 149/2026 changes six areas of the VAT Executive Regulation.
- Composite supply. The single-supply regime is clarified: where components are economically linked, artificial splitting is no longer allowed.
- Cash payments (new Article 54(3)). Input VAT recovery is denied on supplies above a threshold when payment is in cash.
- Input-tax apportionment (Article 55). A revised methodology for mixed activity applies from the first Tax Year commencing after 1 October 2027.
- Employee accommodation. Input-VAT recovery on staff accommodation is narrowed to cases where accommodation is mandatory under UAE labour law (regulator: MoHRE).
- Medical products. The VAT treatment of the supply and import of medical products is aligned with the UAE's revised healthcare-sector legislative framework.
- Capital Assets Scheme. The scope of the scheme — under which VAT on large long-term assets is recovered or adjusted over a fixed period — is refined.
Adoption date of the Cabinet Decision: 1 September 2026; MoF public announcement: 8 September 2026; general effective date: 1 October 2026. One item — the Article 55 apportionment methodology — has a transitional window until the first Tax Year commencing after 1 October 2027.
Cash payments and the new Article 54(3)
The most operationally visible change for everyday business is the new Article 54(3) of the Executive Regulation. The rule reads as follows: where the value of a supply exceeds a threshold set by a separate decision of the Minister of Finance, and the consideration is paid or intended to be paid in cash, the input VAT on that supply cannot be recovered.
The threshold amount itself is not stated in Cabinet Decision 149/2026. It will be set by a separate Ministerial Decision, which had not been issued as of the announcement date (8 September 2026). Technically the rule takes effect on 1 October 2026, but in practice it only bites once the Minister publishes the threshold.
Practical takeaway for SMEs and outsourced accounting firms: shift large payments to non-cash channels now — bank transfers, corporate cards, payment gateways — and archive bank confirmations. This is the same direction of travel as electronic invoicing in the UAE: the MoF is consistently pushing UAE business towards documented, machine-readable transactions where the payment trail is visible in the system.
Composite supply: the economic-substance test
The second major change concerns bundled sales. Before CD 149/2026 there was some interpretive space for business to split a bundle into components — taxable and exempt or zero-rated — and claim separate VAT treatment with a more favourable effective rate. The new rules narrow that door.
The logic now: where several components are economically linked and, in real commercial practice, the customer acquires them as a single supply with one principal component, the whole transaction is subject to VAT under the regime of the principal component. The test is the "economic substance" of the supply. That affects retail, healthcare, HoReCa, insurance and any bundle where a business could previously carve out an exempt part.
Task for businesses: audit your bundled products before 1 October 2026 and revisit your VAT accounting policy — where you genuinely have a single composite supply, and where separate recognition remains allowed.
Apportionment under Article 55: transitional window to 2027
Businesses with mixed activity — that is, simultaneously making both taxable supplies (at the standard 5% UAE VAT rate) and exempt supplies — use an apportionment mechanism to allocate input VAT between the two categories. CD 149/2026 changes the methodology of that allocation (Article 55 of the Executive Regulation).
The new methodology, however, is not automatically applied from 1 October 2026. Under Cabinet Decision 149/2026 itself, the revised apportionment rules take effect from the first Tax Year commencing after 1 October 2027. For companies on a calendar financial year, that is Tax Year 2028 (starting 1 January 2028). For companies with non-standard financial years, it is the first Tax Year whose start date falls after 1 October 2027.
The transitional window buys tangible time for businesses and tax advisors. The existing apportionment rules continue to apply in the meantime. But it makes sense to start keeping preparatory mixed-activity registers now — otherwise the first reporting round under the new rules will be retrospectively painful.
Employee accommodation, medical products and the Capital Assets Scheme
The remaining three amendment areas touch narrower segments but are operationally material for the industries concerned.
Employee accommodation. Input-VAT recovery on staff-accommodation spend will be available only where the provision of accommodation is mandatory under UAE labour law (regulator: Ministry of Human Resources and Emiratisation, MoHRE). Voluntary corporate housing packages will lose input-VAT recovery on those costs. HR and finance teams should revisit contracts and internal policies ahead of 1 October.
Medical products. The VAT treatment of the supply and import of medical products is aligned with the UAE's revised healthcare-sector legislative framework. The exact wording will appear in the full CD 149/2026 text in the Official Gazette; for medical-products distributors and importers this is priority reading.
Capital Assets Scheme. The scope of the scheme — under which input VAT on large long-term assets is either reclaimed or adjusted over a fixed period — has been refined. Exact thresholds and parameters are again disclosed in the full Cabinet Decision text.
What businesses should do before 1 October 2026
A practical 10-day checklist ahead of the effective date:
- Cash-payment audit. Review contracts and internal policies on large purchases; move large payments to non-cash channels now and archive bank confirmations — as soon as the Minister publishes the Article 54(3) threshold, cash recovery above it will be blocked.
- Bundled sales. Audit your own bundles and packages: where you have a genuine single composite supply, and where separate recognition is still allowed. Update the VAT accounting policy.
- Employee accommodation. Check which staff-accommodation provision is mandatory under MoHRE and which is a voluntary corporate benefit. Recalculate the recoverable input VAT for each category.
- Medical products. Distributors and importers — align catalogues with the revised UAE healthcare-sector framework.
- Mixed activity. If you have simultaneous taxable and exempt supplies, start building preparatory apportionment registers under the revised Article 55 methodology, even though the transitional window runs to 2028.
The full text of Cabinet Decision 149/2026 is published in the UAE Official Gazette; accompanying FTA guidance and the Ministerial Decision on the cash-payment threshold are expected in the weeks after the general effective date. It is worth tracking further guidance on the Federal Tax Authority (tax.gov.ae) and Ministry of Finance (mof.gov.ae) websites.
This review is based on the UAE Ministry of Finance press release of 8 September 2026 and open sources (Gulf News, VATupdate, IR Global, Sharjah24, Emirates 24|7). It is informational only and does not constitute tax or legal advice. Individual application of the amendments depends on a company's structure and activity profile — for a specific assessment, consult an accredited UAE tax adviser.
