UAE updates its VAT Executive Regulation for greater clarity, effective 1 October 2026

The UAE Ministry of Finance announced on 8 September 2026 the issuance of Cabinet Decision No. 149 of 2026, which amends certain provisions of the Executive Regulation of Federal Decree-Law No. 8 of 2017 on Value Added Tax. The decision is dated 1 September 2026. According to the Ministry, the changes aim to simplify procedures and provide greater clarity for taxable persons, supporting voluntary compliance and reducing tax disputes.

The key changes

• Effective date. The decision takes effect from 1 October 2026. The revised input tax apportionment provisions apply from the first tax year commencing after 1 October 2027.
• Composite supplies. A supply made up of more than one component that cannot be separated is treated as a single composite supply, with VAT applied according to its economic substance.
• Employee costs. Input tax recovery on goods or services provided to employees is clarified. It covers cases where provision is mandatory under the applicable labour legislation, or where it is a contractual obligation or documented policy. The treatment of employee accommodation is also clarified.
• Medical products. The rules for supplying and importing medical products are updated in line with the UAE's healthcare legislation. Medical products specified in a Cabinet decision are zero-rated.
• Capital Assets Scheme. The scope of the scheme is clarified so that it is consistent with the VAT Law.
• Input tax apportionment. The method is refined to better reflect each taxable person's economic activities. The existing method for government entities and charities is retained.
• Cash payments. Input tax may not be recovered on a supply above a value to be specified by a decision of the Minister of Finance where payment is made, or intended to be made, in cash.

Why it matters for international clients

Clear rules make VAT more predictable. Founders and investors setting up in the UAE can now plan employee benefits, bundled offers and large asset purchases with more certainty about how much VAT they can recover. Groups with mixed taxable and exempt activities, such as holding and investment structures, have a year's notice of the new apportionment method before it applies.

What to do

• Review employee benefits and make sure any contractual obligation or policy you rely on is documented.
• Check how bundled products and services are invoiced, so the VAT treatment follows the supply as a whole.
• Pay significant supplier invoices through bank channels rather than in cash.
• If you make both taxable and exempt supplies, model the new apportionment method before your first tax year starting after 1 October 2027.
• Our VAT service covers registration, returns and reviews of input tax recovery. For a wider view of setting up in the UAE, see our guides.

Sources

• UAE Ministry of Finance: Cabinet Decision No. 149 of 2026 amending certain provisions of the Executive Regulation of VAT (English)
• Emirates 24|7 (WAM): UAE updates VAT Executive Regulation to enhance compliance and transparency (8 September 2026)
• Baker McKenzie: United Arab Emirates: VAT Executive Regulation amended (September 2026)

This page gives general information as at the date shown and is not advice for your specific situation. Rules in other countries are summarised for orientation; your home-country position should be confirmed before you act.