If you missed the news, you're not alone: the latest VAT changes arrived quietly in an amendment to the Executive Regulation. Most of them have applied since 1 October 2026, one significant piece doesn't start until 2028, and a couple of rules are waiting on further decisions. Here's what changed, when, and what your finance team should check.
What Are the Latest UAE VAT Changes?
Cabinet Decision No. 149 of 2026 amends the VAT Executive Regulation (Cabinet Decision No. 52 of 2017). It was issued on 1 September 2026, announced by the Ministry of Finance on 8 September, and most amendments took effect on 1 October 2026. The revised input tax apportionment rules apply later.
The stated aims are to align VAT treatment with economic substance, improve legal clarity and protect the tax base. Some changes are substantive. Others are tidy-ups, and it helps to know which is which.
Which Rules Are New for Composite Supplies?
A new clause (Article 4) deals with bundles. Where the components of a supply are interconnected and can't be separated in substance, the supply may be treated as a single composite supply, taxed according to its principal component.
The practical shift is that separate pricing or invoicing no longer automatically means separate supplies. If you sell packages (equipment plus installation, say, or a subscription with bundled services), review how you classify them.
What Changed for Employee Expenses and Accommodation?
Article 53 now ties input tax recovery on certain employee benefits to specific conditions:
- Input tax isn't blocked where labour legislation mandates the benefit, and this now covers free zones generally, not just Designated Zones.
- Employer-provided accommodation qualifies only where the Ministry of Human Resources and Emiratisation mandates it.
- The old contractual-benefit test is replaced by cases and conditions the FTA will specify.
None of this means employee costs are now broadly recoverable. Check each benefit against the conditions, and keep supporting invoices and approvals.
How Do the Cash Payment Rules Work?
A new clause (Article 54) restricts input tax recovery on supplies above a certain value where payment is made, or intended to be made, in cash. The aim is to strengthen compliance and reduce evasion risk.
The catch: the threshold has to be set by a separate Ministerial decision, and the commentary we reviewed said it hadn't been issued. We haven't quoted a figure for that reason. Until it's published, review how your business pays suppliers, and watch for the decision.
What About Healthcare, Capital Assets and Credit Notes?
Healthcare. Article 41 merges pharmaceutical products and medical equipment into one category of "medical products", as defined in a Cabinet Decision. KPMG notes that zero-rating of related goods is largely unchanged. Healthcare suppliers and importers should still confirm their classifications and the documents supporting zero-rating.
Capital Assets Scheme. The amendment clarifies the wording, so the scheme now refers to a "business asset" rather than a "single item of expenditure". Deloitte and KPMG both say the AED 5 million threshold and the useful-life conditions (10 years or more for buildings, 5 years or more for other assets) are unchanged. Review your asset register to confirm which assets fall in scope.
Credit notes. This one is mostly a drafting fix. Article 60 now requires the words "Tax Credit Note" to appear on the credit note itself, where the old text wrongly referred to the invoice. Check that your credit note template shows that wording.
Profit Margin Scheme. Article 29 now includes acquisition costs or fees in the purchase price for margin calculations only where the related input tax isn't recoverable. That prevents recovering input tax and also reduces the margin on the same cost. Scheme users should recheck their calculations.
Which VAT Changes Apply Later?
The big one is input tax apportionment. If you make both taxable and exempt supplies, you apportion input tax on shared costs. The new standard method switches from an input-tax basis to a supply-value basis: taxable supplies divided by total supplies, with certain items (such as capital assets) excluded. Government entities and charities keep an input-based method.
These provisions apply from the first tax year commencing after 1 October 2027. For a 1 January to 31 December tax year, that's 1 January 2028. Depending on your mix of supplies, recoverable input tax could rise or fall, so model it before the year starts.
What Are the Key Dates at a Glance?
| Change | Timing |
| Composite supplies | 1 October 2026 |
| Employee expenses and accommodation | 1 October 2026 |
| Cash payment restriction | Provision in force 1 October 2026; threshold set separately |
| Healthcare (medical products) | 1 October 2026 |
| Capital Assets Scheme clarification | 1 October 2026 |
| Tax credit note wording | 1 October 2026 |
| Profit Margin Scheme | 1 October 2026 |
| Input tax apportionment | First tax year starting after 1 October 2027 |
How Can Businesses Prepare?
Work through this checklist:
- [ ] Read Cabinet Decision No. 149 of 2026 and mark what applies to you
- [ ] Review how you treat bundled products and services
- [ ] Reassess input tax recovery on employee costs and accommodation
- [ ] Check payment controls, and watch for the cash threshold decision
- [ ] Confirm VAT classifications for any medical products
- [ ] Check your capital asset register and adjustment records
- [ ] Update your credit note template and review Profit Margin Scheme workings
- [ ] Model the new apportionment method before your 2028 tax year
- [ ] Update accounting procedures and brief your finance team
On the software side, review your VAT codes, credit note templates and recovery settings. If you use Tally, ask your implementation partner which changes need configuration updates.
So, What Should You Do First?
Start with the October 2026 items, because they already apply: composite supplies, employee costs and credit note wording. Then put the 2028 apportionment change in your diary and the cash threshold on your watch list. Because the details are technical, confirm the final wording against the Cabinet Decision, the FTA's guidance or your tax adviser before changing your process.
Want Your VAT Setup Checked Against the New Rules?
Rule changes like these usually bite in the accounting system first: a template that's out of date, or a recovery setting nobody revisited. Global Software helps UAE businesses review their Tally Prime VAT configuration, so the books match the regulation.
Want to know if your VAT setup is up to date? Talk to Global Software and get it reviewed.
What Are the Most Common Questions About These VAT Changes?
What is Cabinet Decision No. 149 of 2026? It amends the VAT Executive Regulation, covering composite supplies, employee benefits, cash payments, medical products, capital assets, credit notes, and apportionment.
Do all the changes apply from 1 October 2026? No. Most do, but the revised apportionment rules apply from the first tax year starting after 1 October 2027.
Are cash payments now automatically ineligible for input tax recovery? No. The restriction applies above a threshold the Minister of Finance has yet to set. Check for the decision before changing procedures.
Did the Capital Assets Scheme threshold change? Deloitte and KPMG both report the AED 5 million threshold is unchanged. The wording was clarified.
Is employee accommodation now recoverable? Only where the Ministry of Human Resources and Emiratisation mandates it. Check each arrangement.
Do credit notes need a new process? Mainly a wording change. The credit note itself must show "Tax Credit Note".
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