Cabinet Decision No. 149 of 2026 was issued on 1 September and amends the VAT Executive Regulation from 1 October 2026 — the same day FTA Decision 13 starts. It touches twelve points. Most are narrow. Three are not: input VAT on purchases paid in cash above a threshold the Minister has yet to set; staff accommodation taken out of the rule that keeps input VAT on mandatory employee benefits recoverable; and, from the first tax year beginning after 1 October 2027, a partial-exemption ratio that runs on turnover instead of on input tax. This page goes through every amended article against the Ministry’s consolidated text, with the date each one bites.
Every change, and when it applies
| Article | What changes | From |
|---|---|---|
| 54(3) new | No input tax recovery on a supply whose value exceeds an amount the Minister will set, where the consideration is paid or intended to be paid in cash | 1 Oct 2026 |
| 53(1)(c)(1) | Benefits that labour legislation makes mandatory — now expressly including financial and non-financial free zones — stay recoverable, except employee accommodation, unless MoHRE decisions or directives make it mandatory | 1 Oct 2026 |
| 53(1)(c)(2) | Benefits provided under a contract or documented policy stay recoverable “in accordance with the cases and conditions specified by the Authority” | 1 Oct 2026 |
| 4(6) new | A supply whose components are interconnected and cannot be separated may not be treated as multiple supplies; it is a single composite supply, taxed as its principal component | 1 Oct 2026 |
| 41(4) | Zero-rating covers “any medical product as specified in a decision issued by the Cabinet”, replacing the separate pharmaceutical-products and medical-equipment paragraphs | 1 Oct 2026 |
| 57(1) | A Capital Asset is “a business asset with a cost amounting to AED 5,000,000 or more”, in place of “a single item of expenditure” of that amount | 1 Oct 2026 |
| 29(5) | Profit-margin scheme: purchase costs and fees count towards the purchase price only where the input tax on them is not recoverable | 1 Oct 2026 |
| 52(2) | A person is “outside the State” if present for less than 30 days (was “less than a month”) and the presence is not effectively connected with the supply | 1 Oct 2026 |
| 60(1)(a) | The words “Tax Credit Note” must be displayed on the credit note (the text previously said “on the invoice”) | 1 Oct 2026 |
| 55(6), 55(7) | The standard apportionment ratio moves from input tax to the value of supplies, with capital-asset sales and reverse-charge receipts excluded | First tax year starting after 1 Oct 2027 |
| 55(19) new | Government entities and charities keep the input-tax ratio | First tax year starting after 1 Oct 2027 |
Article numbers are those of Cabinet Decision No. 52 of 2017 as consolidated. The English text is the Ministry’s unofficial translation; the Arabic governs.
Cash: the threshold Decision 13 pointed at
When we wrote up FTA Decision 13 in August, its payment condition pointed at a cash threshold “specified in the applicable Tax legislation” that we could not find in the VAT Law or the Tax Procedures Law. It now has a home. New Clause 3 of Article 54 reads, in the Ministry’s translation:
“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 things in that sentence deserve a slow read. The amount is not in the Regulation; it comes in a decision of the Minister of Finance that had not been published when this was written. The block attaches where consideration is paid “or intended to be paid” in cash — so the test is at the point of claim, not at settlement, and an invoice you plan to settle in cash is caught before a note has changed hands. And the clause is a stand-alone bar on recovery: it does not depend on tax evasion in the chain the way Article 54 bis does. Decision 13 asks you to document a commercial reason for paying cash; from 1 October, above the Minister’s figure and subject to whatever controls that decision sets, the input tax is simply not recoverable.
What this means in practice depends entirely on the figure, so we will not guess at it. The policy decision does not: a business that pays suppliers in cash above small sums needs a written position now, and a way of flagging those invoices in the purchase ledger so that the claim is not made by default.
Staff accommodation
Article 53 lists the input tax that cannot be recovered. Since 2018, goods and services bought for employees’ personal benefit have been blocked. The exceptions now number four: where labour law makes providing them mandatory; where a contract or documented policy provides them so that staff can do their jobs; health insurance within stated limits; and deemed supplies. The first two are rewritten. The first now covers benefits mandatory “under the applicable labour legislation in the State or any free zone, including financial and non-financial free zones” — which settles a point for DIFC and ADGM employers — but it then carves out 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”.
The second exception, for contractual and documented-policy benefits, loses its own test (“in order that they may perform their role and it can be proven to be normal business practice”) and instead applies “in accordance with the cases and conditions specified by the Authority”. Until the FTA publishes them, a business relying on this exception is relying on a boundary that has not yet been drawn. The cautious course is to list every benefit recovered under it and be ready to test each one against whatever the Authority specifies.
The businesses this reaches are the ones that house people as a matter of course — construction, hospitality, manufacturing, facilities management, any employer running labour accommodation or staff housing. The question for each of them is whether the housing is mandatory under a MoHRE decision or directive for the workers concerned, or provided by contract or policy. Only the first keeps the input tax without further conditions. That is a fact about your workforce and your paperwork, not about the Regulation, and it is the first thing to establish.
One price, one supply
Article 4 already said when a bundle is a single composite supply (one price, one supplier, components that would be unnatural to split) and that a bundle failing those tests is multiple supplies. New Clause 6 closes the door from the other side: a taxable person may not treat a supply as multiple supplies “if the nature of the supply and its economic substance demonstrate that these components are interconnected and cannot be separated”. In that case it is a single composite supply and takes the treatment of its principal component.
The obvious target is pricing that separates a zero-rated or exempt element from a standard-rated one to lower the tax on a package. The Regulation now says substance decides, not the invoice layout. If you sell bundles — equipment with installation, a course with materials, accommodation with services — the review is whether the elements genuinely stand alone, and whether the tax treatment you apply follows the principal component when they do not.
Medical products
Article 41(4) zero-rated pharmaceutical products and medical equipment as specified in Cabinet decisions. Both paragraphs are replaced by one: “any medical product as specified in a decision issued by the Cabinet”. The Ministry describes the change as aligning the VAT text with the updated legislative framework for the healthcare sector. The zero rate is not withdrawn — the goods that qualify are those a Cabinet decision names — and the residual paragraph for other goods necessary to zero-rated healthcare services is kept. For pharmacies, distributors and clinics the question is which Cabinet decision now carries the list, and that is one to watch rather than assume.
The Capital Assets Scheme
Article 57 defined a Capital Asset as “a single item of expenditure of the Business amounting to AED 5,000,000 or more”. It now reads “a business asset with a cost amounting to AED 5,000,000 or more”, excluding tax, with the same useful-life tests: ten years for a building or part of one, five years for anything else. The staged-payment rule that aggregates smaller sums for a building or an installed asset is unchanged. The Ministry calls this a clarification for consistency with the Decree-Law, which defines Capital Assets as “business assets designated for long-term use”. The practical reading is that the scheme follows the asset and its cost, however the spend was invoiced — worth checking against how your fixed-asset register groups capitalised costs.
Three smaller ones
- Profit margin, Article 29(5). The purchase price of second-hand goods, antiques and collectors’ items includes purchase costs and fees only “provided that the Input Tax on such costs or fees, where incurred, is not recoverable” under Article 54 of the Decree-Law. A cost whose VAT you have recovered cannot also shrink the margin.
- Outside the State, Article 52(2). For the recovery rule on financial services supplied to non-residents, a person is outside the State if present for less than 30 days and the presence is not effectively connected with the supply. The old text said “less than a month”.
- Credit notes, Article 60(1)(a). The words “Tax Credit Note” must be clearly displayed on the credit note. The previous text said “on the invoice”; nothing changes in practice.
2027: the apportionment ratio moves from costs to sales
This is the largest change and the one with the longest fuse. A business that makes both taxable and exempt supplies recovers input tax on its shared costs — rent, IT, audit fees — in proportion. Today, under Article 55(7) and as the FTA’s apportionment guide sets it out, the proportion is a ÷ (a + b): input tax wholly attributable to taxable supplies over the sum of that and input tax wholly attributable to exempt supplies, rounded to a whole number, applied to the residual. From the first tax year commencing after 1 October 2027 the ratio is the value of supplies under Article 54(1) of the Decree-Law over the total value of all supplies — broadly taxable turnover over total turnover — with the sale of capital assets and reverse-charge receipts under Article 48 left out of the calculation, again rounded to a whole number.
The same costs can therefore give a different answer, in either direction. Take a business with AED 300,000 of input tax on costs used only for taxable supplies, AED 100,000 on costs used only for exempt supplies, and AED 60,000 on shared overheads:
| Method | Ratio | Percentage | Of AED 60,000 residual |
|---|---|---|---|
| Current — input tax | 300,000 ÷ (300,000 + 100,000) | 75% | AED 45,000 |
| From 2027 — supplies, if taxable turnover is AED 8m of AED 10m | 8,000,000 ÷ 10,000,000 | 80% | AED 48,000 |
| From 2027 — supplies, if taxable turnover is AED 6m of AED 10m | 6,000,000 ÷ 10,000,000 | 60% | AED 36,000 |
A business whose exempt activity is large in turnover but cheap to run — a landlord with residential lets beside commercial ones, say — recovers less under the new ratio. One whose exempt activity is small in turnover but costly to run recovers more. Neither is a rounding difference, and the annual wash-up and the actual-use adjustment in Article 55 continue to sit on top of whichever ratio applies. Government entities and charities are taken out of the switch by new Clause 19 and keep an input-tax ratio.
On the date. “The first Tax year commencing after 1 October 2027” is later than it sounds. A tax year under Article 55 follows the registration stagger, not the financial year: a monthly filer’s tax year is the calendar year, and a quarterly filer’s ends on 31 January, the last day of February or 31 March. So, in the ordinary case, a monthly filer moves to the new ratio on 1 January 2028 and a quarterly filer between 1 February and 1 April 2028; a registrant on a twelve-month tax period moves at the start of its first such period after 1 October 2027. That is time enough to model it — and, where the standard method would not give a fair result, to consider whether one of the special methods the FTA already approves on application would.
What to do before 1 October
- Decide your cash position in writing and tag cash-settled purchase invoices in the ledger, so that when the Minister’s figure lands the claim above it is already excluded rather than corrected later.
- List every case where you recover VAT on staff accommodation, and for each one establish whether the housing is mandatory under a MoHRE decision or directive, or provided under contract or policy. Only the first keeps the recovery without further conditions from 1 October.
- Review bundled pricing for any package whose elements carry different rates, and record why the elements do or do not stand alone.
- If you sell medical products, identify the Cabinet decision the zero rate now points to before the next return.
- If you are partially exempt, run this year’s numbers through both ratios. You have until 2028 — enough time to model it and, if the standard method will not reflect your actual use, to apply for a special method before it bites.
Our VAT return filing work covers the apportionment calculation and the annual wash-up; the VAT page has the checker for whether you need to be registered at all.
Written on 11 September 2026 from the consolidated English text of Cabinet Decision No. 52 of 2017 and its amendments published by the Ministry of Finance in September 2026, which incorporates Cabinet Decision No. 149 of 2026 (issued 1 September 2026, in force 1 October 2026; the Article 55 apportionment provisions apply from the first tax year commencing after 1 October 2027), and from the Ministry’s announcement of the amendments on 8 September 2026 as reported. The current standard apportionment formula is as set out in the FTA’s VAT Guide on Input Tax Apportionment (VATGIT1). At the date of writing the Minister of Finance’s decision setting the cash-payment threshold had not been published and the FTA had issued no guidance on the amendments. The English text is not an official translation; the Arabic governs. We will update this page when the threshold decision or FTA guidance is published. General information on published law, not advice on your own position.