On 1 October 2026, most of the changes in Cabinet Decision No. 149 of 2026, which amends the UAE VAT Executive Regulation, came into force. The Ministry of Finance announced the decision on 8 September 2026, and PwC confirms the 1 October start for most provisions. A related Federal Tax Authority decision on employee benefits took effect the same day.
What changes
- Cash purchases: input tax cannot be recovered on supplies above a threshold where payment is made, or intended to be made, in cash. The Minister of Finance will set the threshold in a separate decision, so the amount is not yet known.
- Employee benefits: Gulf News reports that FTA Decision No. 17 of 2026 sets conditions for recovering VAT on six types of free staff benefits: transport, meals, operational accommodation, temporary housing for new recruits for up to 30 days, phones and internet, and parking. Writing a benefit into a contract or handbook is not enough on its own.
- Composite supplies: elements that are economically inseparable are treated as one supply for VAT.
- Apportionment: according to EY, the default method for businesses with exempt and taxable sales moves to an output-based method, but only from the first tax year starting after 1 October 2027.
What it means for founders
If you give staff transport, meals, phones or parking, the VAT on those costs is now recoverable only where the benefit meets the FTA conditions and you have the paperwork. Where it fails, the benefit can continue but the VAT becomes a cost. Founders who still pay suppliers in cash should expect that habit to cost VAT once the threshold is published.
What to do now
- List every free benefit you give staff and check each one against the FTA Decision No. 17 conditions.
- Write down usage rules for company phones and parking, with records, since monitoring is part of the test.
- Move regular supplier payments to bank transfer or card before the cash threshold is set.
- Watch for the Ministerial Decision on the cash threshold and check the current text before you file your next return.
Sources: Ministry of Finance, Ministry of Finance announces amendments to the VAT Executive Regulation; PwC, Amendments to the UAE VAT Executive Regulation; EY, UAE amends VAT Executive Regulations; Gulf News, UAE VAT rules change on staff expense claims
This is general information, not legal or tax advice.