UAE VAT Executive Regulation: What Changes Under Cabinet Decision No. 149 of 2026

Last Updated on September 30, 2026 by Shitiz Srivastava

The UAE Cabinet has issued a fresh round of amendments to the Executive Regulation of the Federal Decree-Law No. 8 of 2017 on Value Added Tax. Cabinet Decision No. 149 of 2026 was issued on 1 September 2026 and takes effect from 1 October 2026, although certain amendments to the input tax apportionment rules apply only from the first tax year commencing after 1 October 2027. Businesses registered for VAT in the UAE, and anyone advising them, should treat this as the current baseline going into Q4 2026. For the basics, see our Dubai VAT guide.

What this document actually is

It’s important to separate two things that are often confused:

• The Federal Decree-Law No. 8 of 2017 on Value Added Tax — the primary VAT law passed by the UAE Cabinet, which sets out the tax itself (rates, scope, who must register).
• The Executive Regulation — Cabinet Decision No. 52 of 2017, issued a few months later, which fills in the operational detail: how registration thresholds are calculated, how zero-rating and exemptions are applied, how input tax is recovered and apportioned, what a valid tax invoice must contain, and so on.

Almost all day-to-day VAT compliance work — invoicing, input tax recovery, designated zones, tourist refunds, capital assets adjustments — is governed by the Executive Regulation rather than the Decree-Law itself. It is published by the Ministry of Finance, with implementation overseen by the Federal Tax Authority (FTA).

A regulation that keeps getting amended

Since it first came into force on 1 January 2018, the Executive Regulation has been revised repeatedly to keep pace with how VAT is actually applied in practice:

Cabinet Decision	Issued	Effective
No. 52 of 2017 (original)	26 Nov 2017	1 Jan 2018
No. 46 of 2020	4 Jun 2020	4 Jun 2020
No. 24 of 2021	11 Mar 2021	1 Jan 2018
No. 88 of 2021	28 Sep 2021	30 Oct 2021
No. 99 of 2022	21 Oct 2022	1 Jan 2023
No. 100 of 2024	6 Sep 2024	15 Nov 2024
No. 100 of 2025	12 Aug 2025	29 Sep 2025
No. 149 of 2026	1 Sep 2026	1 Oct 2026*

\*Certain input-tax apportionment provisions come into effect only for tax years commencing after 1 October 2027 — see below.

The 2024 decision was a wholesale rewrite touching nearly every article. The 2026 decision amends a narrower set of specific articles.

What Cabinet Decision No. 149 of 2026 actually changes

Checked against the amended clauses in the consolidated text, the changes cluster around composite supplies, deemed goods flows, and — most substantially — input tax recovery.

1. A new “economic substance” test for composite supplies (Article 4, new Clause 6)

Where a supply has more than one component, a Taxable Person can no longer treat it as multiple separate supplies if the nature and economic substance of the components show they’re genuinely interconnected and can’t be separated. In that case, the whole thing is now deemed a single composite supply, taxed according to its principal component. This closes a structuring gap where bundled supplies were being artificially split to get more favourable tax treatment on individual pieces.

A common misconception worth addressing directly: several summaries of this amendment (including AI-generated ones) attribute a new AED 250,000 deemed-supply threshold for Government Entities and Charities to Cabinet Decision No. 149 of 2026. That threshold exists in Article 5(2)(b) — but it carries no 2026 footnote, and the article’s own footnote states it was last amended by Cabinet Decision No. 100 of 2024. It is not part of this amendment.

2. Profit margin scheme — what counts as “purchase price” (Article 29(5))

The clause defining “purchase price” for the profit margin scheme (used for second-hand goods, antiques, and collectors’ items) has been clarified: it now includes costs or fees incurred to purchase the good, but only where the input tax on those costs isn’t otherwise recoverable under Article 54 of the Decree-Law. This tightens how the margin — and the VAT charged on it — is calculated.

3. Zero-rating for medical goods and imports (Article 41(4))

Within the healthcare zero-rating provisions, the clause covering when a supply or import of goods qualifies as zero-rated (medical products specified by Cabinet decision, plus certain other goods) has been amended — refining which imported medical and healthcare-related goods fall within the zero-rated scope.

4. The “outside the State” test for exempt financial services input tax (Article 52(2))

For input tax recovery tied to exempt financial services supplied to recipients outside the UAE, the test for when a recipient counts as “outside the State” (broadly: present for under 30 days, with that presence not effectively connected to the supply) has been amended.

5. Two employee-benefit carve-outs on non-recoverable input tax (Article 53)

Two sub-clauses within Article 53’s employee-benefits exception have been amended. One clarifies that the general exception for goods/services mandatory under UAE labour law does not extend to employer-provided accommodation — unless that accommodation is itself mandated by a Ministry of Human Resources and Emiratisation decision or directive. The other amends the exception for goods/services provided under a contractual obligation or documented policy, tying it to cases and conditions the FTA specifies. (The article separately allows recovery on employee health insurance, including enhanced cover for a spouse and up to three children under 18 — but that specific sub-clause carries no 2026 footnote in the consolidated text, so it isn’t part of this amendment.)

6. Restriction on input tax recovery for certain cash payments (Article 54, new Clause 3)

A new clause provides that Input Tax may not be recovered on a supply exceeding an amount to be specified by the Minister, where the consideration is paid or intended to be paid in cash, subject to controls the Minister’s decision will set out. The actual monetary threshold depends on that decision, which has not yet been issued.

7. A significant overhaul of input tax apportionment (Article 55) — phased in for 2027

This is the headline change. The general apportionment mechanism has been rewritten: a Taxable Person calculates the percentage of qualifying supplies under Article 54(1) of the Decree-Law against the total value of all supplies, excludes specified items (including Capital Assets and certain Concerned Goods/Services from the calculation), and rounds the resulting percentage to the nearest whole number before applying it to the relevant Input Tax. A separate, distinct mechanism has also been added for Government Entities and Charities, calculated instead as a percentage of recoverable Input Tax to total recoverable-plus-non-recoverable Input Tax for the period, also rounded to the nearest whole number. Critically, the Cabinet has deferred this article’s changes: they only take effect for the first tax year commencing after 1 October 2027.

8. Capital Asset threshold and useful life (Article 57(1))

The definition of a Capital Asset for the Capital Asset Scheme has been amended: a business asset costing AED 5,000,000 or more (excluding tax), with an estimated useful life of at least 10 years for a building or 5 years for any other Capital Asset, in order to qualify.

9. Tax Credit Note wording requirement (Article 60(1)(a))

The requirement that a Tax Credit Note clearly display the words “Tax Credit Note” has been amended at the paragraph level.

Why the phased effective date matters

Most of Cabinet Decision No. 149 of 2026 lands on 1 October 2026, alongside the routine VAT return cycle. But the rewritten Article 55 apportionment rules are explicitly delayed: they apply only from the first tax year commencing after 1 October 2027. That gives every business that makes both taxable and exempt supplies, as well as Government Entities and Charities with their separate mechanism, time to model the new calculation before it becomes mandatory.

What this means in practice

• Businesses bundling goods or services for a single price should reassess whether their supplies now fall inside the new economic-substance test in Article 4(6) — splitting a genuinely interconnected supply into separate line items for tax purposes is no longer safe.
• Anyone accepting large cash payments should watch for the Minister’s decision setting the value threshold under the new Article 54(3) — once issued, input tax above that threshold becomes non-recoverable on cash-paid supplies.
• Employers providing mandatory employee accommodation or benefits under a documented policy should revisit input tax recovery calculations once the Article 53 amendments take effect.
• Businesses with mixed taxable and exempt supplies, and Government Entities and Charities, have until tax years starting after 1 October 2027 to move to the new input tax apportionment mechanisms under Article 55, but should start planning now, since the calculation is structurally different from the current one.
• Anyone using the profit margin scheme, the capital assets scheme, or importing medical/healthcare goods should re-check the relevant article against the amended wording rather than relying on the 2024 version.

A moving target

Eight Cabinet Decisions in under nine years is a reminder that UAE VAT law is still being actively tuned rather than settled. For anyone relying on the Executive Regulation for compliance, tax planning, or client advice, always confirm which consolidated version — and which amendment — is currently in force before acting on a specific article, since provisions can carry their own delayed or backdated effective dates independent of the decision that introduced them.

Frequently Asked Questions

What is Cabinet Decision No. 149 of 2026?

It’s the latest Cabinet Decision amending the Executive Regulation of the Federal Decree-Law No. 8 of 2017 on Value Added Tax (originally Cabinet Decision No. 52 of 2017). It was issued on 1 September 2026.

When does Cabinet Decision No. 149 of 2026 take effect?

Most of it takes effect on 1 October 2026. The exception is the Article 55 input tax apportionment changes, which apply only from the first tax year commencing after 1 October 2027.

What’s the difference between the VAT Decree-Law and the Executive Regulation?

The Federal Decree-Law No. 8 of 2017 is the primary VAT law — it sets out the tax itself, its scope, and who must register. The Executive Regulation (Cabinet Decision No. 52 of 2017 and its amendments) supplies the operational detail: how thresholds are calculated, how zero-rating and exemptions apply, how input tax is recovered, invoicing requirements, and similar mechanics. Most day-to-day compliance work sits within the Executive Regulation.

Does the new input tax apportionment rule under Article 55 apply now?

No. It applies from the first tax year commencing after 1 October 2027, not from 1 October 2026 like most of the rest of Cabinet Decision No. 149 of 2026.

What is the new rule on cash payments and input tax recovery?

A new clause in Article 54 provides that input tax cannot be recovered on a supply exceeding a value threshold to be specified by the Minister, where the consideration is paid or intended to be paid in cash, subject to controls the Minister’s decision will set out. The actual AED threshold has not yet been published.

Has the AED 250,000 deemed-supply threshold for Government Entities and Charities changed in 2026?

No. This threshold, in Article 5(2)(b), was last amended by Cabinet Decision No. 100 of 2024. It is unaffected by the 2026 amendment, despite being commonly (and incorrectly) cited as a 2026 change.

Does Cabinet Decision No. 149 of 2026 affect VAT registration thresholds?

No. The mandatory (AED 375,000) and voluntary (AED 187,500) registration thresholds under Article 7 and Article 8 are unchanged by this amendment. You can work out VAT on any amount with our UAE VAT calculator.

Where can I find the official text of the UAE VAT Executive Regulation?

The authoritative version is published by the UAE Ministry of Finance and the Federal Tax Authority. This article is based on their September 2026 consolidated publication, which itself is labelled “not an official translation” — for a binding position, refer to the official Arabic text or confirm with a UAE-licensed tax advisor.

This article is for general informational purposes and does not constitute tax or legal advice. For a specific transaction or filing position, consult a UAE-licensed tax agent or legal advisor, or refer to the official text published by the UAE Ministry of Finance and the Federal Tax Authority.