Nine VAT rules change on 1 October 2026. The rate is not one of them.

All twelve changes, in one table

The Ministry publishes the Executive Regulation as a single consolidated text with footnotes marking each amendment. These are the twelve clauses its September 2026 edition footnotes to Cabinet Decision No. 149 of 2026.

The one that will change behaviour: cash payments stop carrying input tax

Article 54 gains a third clause, and it is short enough to quote in full:

"Input Tax may not be recovered on any supply which has a value exceeding the amount specified in a decision issued by the Minister where the consideration is paid or intended to be paid in cash, in accordance with the controls specified in that decision."

Three features of that sentence are worth separating.

• It is not a cap on the deduction — it is a block on the supply. The clause does not restrict recovery to the threshold and allow the rest; it says input tax may not be recovered on a supply whose value exceeds the amount. Above the line, the whole input tax on that supply is at risk, not the excess.
• "Paid or intended to be paid" reaches the arrangement, not just the payment. A supply invoiced with the intention of cash settlement is inside the wording before any money moves. In practice that puts the question at procurement, not at the payment run.
• The number still does not exist. The clause delegates both the amount and the controls to a Ministerial decision. We checked the Ministry of Finance legislation list and the Federal Tax Authority news page again on 1 October 2026, the day the clause took effect: the last tax instrument on the Ministry's list is still Cabinet Decision No. 149 of 2026 itself, and no decision under Article 54(3) has been published. The prohibition is therefore in force as a live provision with no operative threshold — it binds only once the Minister publishes one, and nothing paid in cash since 1 October has crossed a line that does not yet exist.

The practical preparation is not a policy change but a data question: can your finance system tell you, today, which supplier invoices were settled in cash and what they were worth? Most UAE systems record the payment method on the payment, not on the input tax line, and the two are not always joined up in a way that survives an audit query. That reconciliation is the work, and it is worth doing before the threshold is known rather than after.

Employee accommodation loses its shelter

Article 53(1)(c) is the exception that rescues employee benefits from the input tax block. Sub-paragraph (1) previously read that input tax stayed recoverable where "it is a legal obligation to provide those services or Goods to those employees under any applicable labour law in the State or Designated Zone." It now reads:

"Where the provision of those Goods or Services to the employees is mandatory under the applicable labour legislation in the State or any free zone, including financial and non-financial free zones, provided that this does not include the accommodation provided by the employer to its employees, unless the provision of such accommodation is mandatory pursuant to the decisions or directives issued by the Ministry of Human Resources and Emiratisation."

Two edits, pulling in opposite directions.

• The exception widens on jurisdiction. "Designated Zone" was always the wrong term here — a Designated Zone is a customs-fenced VAT concept, not an employment one, and it left businesses in DIFC and ADGM arguing about whether their own employment regimes counted. "Any free zone, including financial and non-financial free zones" settles that. A DIFC employer relying on DIFC Employment Law now has the same footing as a mainland employer relying on the Labour Law.
• The exception narrows on accommodation. Employer-provided accommodation is expressly outside it, unless MOHRE decisions or directives make that accommodation mandatory. The obvious survivor is worker accommodation required for labour-camp categories; the obvious casualty is housing provided to staff as a contractual perk, however standard it is in the sector.

Sub-paragraph (2) moves in the same direction. The old test was a contractual obligation or documented policy to provide the goods or services "in order that they may perform their role" where it "can be proven to be normal business practice in the course of employing those people" — a self-assessed test a taxable person could argue. The new text ends "in accordance with the cases and conditions specified by the Authority." The judgement moves from the business to the FTA, and the list of qualifying cases is something to watch for.

What is untouched: sub-paragraph (3), the health insurance carve-out. Input tax on health insurance for employees and their family members — up to a husband or one wife and three children under eighteen — remains recoverable, enhanced cover included. If you are working out what an employer must provide in the first place, that is a separate question with its own answer: the three insurance regimes an employer can fall under.

You can no longer split a bundle to suit yourself

Article 4 tells you how to treat a supply of more than one component sold for one price: decide whether it is a single composite supply — taxed as its principal component — or multiple supplies, each taxed on its own. Until now the article defined when a single composite supply exists and then said, in Clause 5, that anything failing those tests is multiple supplies. A new Clause 6 closes the door from the other side:

"A Taxable Person may not consider a supply consisting of more than one component as multiple supplies if the nature of the supply and its economic substance demonstrate that these components are interconnected and cannot be separated. In such case, the supply shall be deemed a single composite supply, and shall be subject to the tax treatment in accordance with its principal component."

The old article was a set of conditions; this is a substance override. Where the components are genuinely inseparable, the classification follows economic substance regardless of how the contract is drawn or how the price is presented. It matters most where the components carry different rates — a zero-rated element bundled with a standard-rated one, or an exempt element bundled with a taxable one. Splitting the invoice to preserve the favourable rate on part of it is precisely what Clause 6 now catches, and the whole supply follows the principal component instead.

The whole Article 4 decision, step by step — the two routes into composite treatment, the two conditions that decide most live cases, what Article 46 does with the answer, and the bundles education, healthcare, transport and leasing law has already split for you.

"Outside the State" becomes a number

Article 52(2) governs when a recipient of financial services counts as outside the UAE, which decides whether input tax on exempt financial supplies can be recovered. The old wording was a description: a person is outside the State "even if they are present in the State, provided it is only a short-term presence in the State of less than a month, and that his presence is not effectively connected with the supply." The new wording is a test: a person is outside the State "if only present in the State for a period of less than 30 (thirty) days, and such presence is not effectively connected with the supply."

"Less than a month" and "less than 30 days" are not the same thing in any month with 31 days, and more importantly one of them is countable and the other is not. This is a smaller change in substance than in administration: it converts a qualitative judgement into a day count that has to be evidenced. The "not effectively connected with the supply" limb survives unchanged and still does most of the work.

The profit margin gets slightly thinner

Article 29(5) tells you what goes into the "purchase price" when you tax second-hand goods, antiques and collectors' items on the margin. It used to say the purchase price includes, in addition to the price of the good, "any costs or fees incurred to purchase the Good." It now says "any costs or purchase fees incurred to purchase the Good, provided that the Input Tax on such costs or fees, where incurred, is not recoverable pursuant to the provisions of Article 54 of the Decree-Law."

The logic is anti-double-relief: a cost whose input tax you have already reclaimed cannot also inflate the purchase price and shrink the taxable margin. The consequence for a dealer is arithmetical. Refurbishment, transport or commission charged with recoverable VAT now sits outside the purchase price, the margin widens by that amount, and the 5% applies to the wider margin. Whether that leaves you better or worse off depends on whether you were reclaiming the input tax on those costs in the first place — if you were, the amendment removes a benefit you were taking twice.

Healthcare: two categories become one

Article 41(4) listed three things whose supply or import is zero-rated alongside healthcare services: (a) pharmaceutical products specified by Cabinet decision, (b) medical equipment specified by Cabinet decision, and (c) other goods supplied in the course of zero-rated healthcare and necessary to it. It now lists two: (a) "any medical product as specified in a decision issued by the Cabinet", and (b) the same residual category, renumbered.

This is a consolidation of the drafting, not a withdrawal of zero-rating: the operative list has always lived in the Cabinet decision the article points to, and that pointer is unchanged. What it does mean is that the distinction between a "pharmaceutical product" and "medical equipment" no longer has to be drawn at the level of the Regulation — a single Cabinet-specified list of medical products governs both. Anyone whose classification arguments turned on which of the two limbs a product fell under should expect that argument to disappear.

Capital assets: an asset, not an item of expenditure

Article 57(1) defined a Capital Asset as "a single item of expenditure of the Business amounting to AED 5,000,000 or more excluding Tax". It now defines it, "for the purposes of the Capital Asset Scheme referred to in Articles 12 and 60 of the Decree-Law", as "a business asset with a cost amounting to AED 5,000,000 or more, excluding Tax".

The threshold does not move. AED 5,000,000 excluding tax, a 10-year adjustment period for buildings and 5 years for everything else, and the aggregation rule in Clause 3 for staged payments are all unchanged. What changes is the unit the test is applied to: the asset and its cost, rather than the expenditure line that bought it. Read with the anchor to Articles 12 and 60 of the Decree-Law, it is a tidying amendment — but it is the kind of tidying that decides borderline cases, and a business with assets sitting close to AED 5m should re-run the test on the new wording rather than assume its old conclusion holds.

And one drafting correction, on credit notes

Article 60(1)(a) required the words "Tax Credit Note" to be "clearly displayed on the invoice". It now says "clearly displayed on the credit note". No one was ever confused, but the fix is worth noting because it lands in the middle of a much bigger shift in how credit notes work: Article 70(4) of the Decree-Law now requires a registrant inside the eInvoicing system to issue tax credit notes as Electronic Credit Notes, and Article 60(8) switches off several of Article 60's own presentation rules for exactly those documents. The four cases where a credit note is compulsory, and the deadline that runs from the adjustment rather than the invoice, are here.

What changes in 2027: partial exemption is rebuilt

Three amendments are deferred to the first tax year commencing after 1 October 2027, and they are the largest in the package for anyone who makes both taxable and exempt supplies — banks, insurers, residential landlords, and most businesses with a mixed property portfolio.

Today, Article 55(7) calculates the recoverable share of residual input tax as a ratio of input tax: recoverable tax over the sum of input tax for the period. From the first tax year after 1 October 2027 it becomes a ratio of supplies:

• the percentage of taxable supplies (those under Article 54(1) and Article 57 of the Decree-Law) to the total value of all supplies;
• excluding, from that calculation, supplies of capital assets attributable to the taxable person and the receipt of concerned goods and concerned services under the reverse charge in Article 48 of the Decree-Law;
• rounded to the nearest whole number, and applied to the residual input tax identified under Clause 6(c).

That is the standard international turnover method, and it will produce a different recovery rate for most partly exempt businesses than the input-tax method does — sometimes materially. The exclusion of capital assets and reverse-charge receipts is the familiar anti-distortion guard: a single large asset sale or a year of heavy imported services should not swing the ratio. A new Clause 19 gives Government Entities and Charities their own version, computing the percentage against total recoverable and non-recoverable input tax for the period.

Two years is less time than it sounds for a business that will have to model both methods, agree a special method with the FTA if the standard one distorts, and change the way its systems tag supplies. The annual wash-up in Clauses 9 and 10 means the first affected tax year is also the first year the new ratio is trued up — so the modelling has to be right before the year starts, not after it ends.

Frequently asked questions

Sources

• Every amended clause, the amendment footnotes identifying Cabinet Decision No. 149 of 2026, and the deferred effective dates for Article 55 — Executive Regulation of the VAT Decree-Law (Cabinet Decision No. 52 of 2017 and its amendments), September 2026 consolidated text, Federal Tax Authority (PDF)
• The previous consolidated text, used here to establish the wording each clause replaced — Executive Regulation consolidated to Cabinet Decision No. 100 of 2025, Ministry of Finance (PDF)
• Articles 12, 48, 54, 57 and 60 of the parent law, referred to throughout the amended clauses, and Article 70(4) on electronic credit notes — Federal Decree-Law No. 8 of 2017 on VAT and its amendments (PDF)
• Legislation library — Federal Tax Authority, Legislation

Re-checked 1 October 2026: the nine clauses are now in force; the Ministry of Finance legislation list and the Federal Tax Authority news page still show no Ministerial decision setting the Article 54(3) cash threshold. First verified 16 September 2026 against the Federal Tax Authority's consolidated Executive Regulation (September 2026 edition) and the Ministry of Finance's previous consolidated edition, both downloaded on the date of verification. The twelve amendments listed here are the twelve clauses the September 2026 text footnotes to Cabinet Decision No. 149 of 2026; the old wording quoted for each is taken from the previous consolidated edition, and the comparison between the two is ours. We have not seen the text of Cabinet Decision No. 149 of 2026 as a standalone instrument — the Authority publishes it only as incorporated into the consolidated Regulation, which is the form that has legal effect. Article 54(3) delegates both the cash-payment threshold and its controls to a decision of the Minister; no such decision appeared on the Ministry of Finance or Federal Tax Authority legislation pages on the date of verification, and we have not assumed a figure. Both consolidated texts are published with the note that they are not official translations.

Related

• The VAT you cannot reclaim — the whole of Article 53 as it now stands, including the entertainment and motor vehicle blocks this page does not cover.
• Composite supply or multiple supplies — the full Article 4 sequence the new Clause 6 sits at the end of, with worked bundles.
• VAT calculator — the 5%, the thresholds, and the eInvoicing timetable in short.
• Electronic credit notes — the four compulsory cases, and the 14-day clock that runs from the adjustment, not the invoice.
• eInvoicing below AED 50 million — the scope rule that has nothing to do with VAT registration, and your date.
• Employer health insurance — the cover that survives the input tax block, and who must provide it.
• Corporate tax calculator — the 9%, the 0% band and the small business relief.
• Business setup cost — mainland and free zone, with the fees that recur.