Laws that surround VAT in the UAE don’t simply operate from just a single document. Instead, Federal Decree-Law No. 8 of 2017 sits at the core of the rules. However, for operational details that tend to involve how supplies are classified, when registration applies, how input tax is calculated, what records are required, all of these live in the Executive Regulation.
That same Executive Regulation, which has its basis through Cabinet Decision No. 52 of 2017, has been updated several times since the launch of VAT in the UAE. The most recent update, Cabinet Decision No. 149 of 2026, that was issued on the 1st of September 2026 introduced changes that affect things like composite supplies, employee expenses, restrictions on cash payment, capital assets, medical products, and input tax apportionment.
Most of these changes will actually take effect on the 1st of October 2026. Then, the revised apportionment rules under Article 55 will apply later from the first Tax Year that starts after the 1st of October 2027. This means that businesses need to know which changes apply and what they will mean for existing processes before the relevant date arrives.
The Legislative Law that Supports VAT in the UAE
The VAT Executive Regulation in the UAE does not in any way replace the already working law on Value Added Taxes. Instead, it tends to fall within the detail that the Decree Law leaves to further regulation. This includes things like conditions, procedures, thresholds, and calculations that the primary legislation requires but does not prescribe.
Reading any VAT provision correctly means being able to understand the article of Federal Decree-Law No. 8 of 2017 that applies alongside the Executive Regulation. Also, FTA decisions and all sorts of published guidance sit on top of that, as a way to be able to provide extra procedures where the legislation gives the authority or the Minister responsibility for specific matters.
The Federal Tax Authority maintains the current legislation register that is responsible for recording the amended Executive Regulation that was issued on the 1st of September 2026 and published on the 10th of September 2026.
Rules That Govern Supplies and How VAT Is Treated
How a transaction is treated for VAT purposes tends to depend on more than its contractual label. The nature of the supply, the parties involved, the place of supply, and whether a zero-rating or even exemption applies, all of these simply feed into the analysis.
A business needs to be able to identify what is actually being supplied before being able to decide how VAT should be charged. The contractual description alone does not determine the correct treatment, especially in a case where the arrangement tends to contain several components.
Composite and Multiple Component Supplies
Some transactions place goods and services together in ways that could only in theory attract different manners that VAT can be treated. The question now is whether those components are genuinely separate supplies or if they simply form one economic arrangement.
Cabinet Decision No. 149 of 2026 introduces a specific rule under Article 4 for this situation. From the 1st of October 2026, where it becomes hard to separate economic components based on their nature and substance, they are treated as a single composite supply.
What this means in practice is that:
- Separate pricing does not automatically mean that there will be different treatment of VAT
- Contractual descriptions do not override the economic substance of the arrangement
- Arrangements that are together where components have previously been assigned different treatments will need to be reviewed before October 2026
Deemed Supplies
VAT can apply to certain transactions even where there has been no sale to a customer. These are called deemed supplies, and they tend to arise under specific conditions that have been set out in the VAT Law and the Executive Regulation in the UAE.
Article 5 of the Executive Regulation provides exceptions and monetary limits for certain categories. Goods that have been supplied as samples or simply commercial gifts, for example, can become subject to an AED 500 per recipient limit.
Businesses should not assume that no VAT arises simply because there was no recorded sale that occurred. The deemed supply rules can catch transactions that are easy to overlook.
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VAT Registration, Deregistration and Tax Groups
VAT Registration and Deregistration
The obligations that are tied to registration of VAT in the UAE are primarily determined by the value and nature of supplies that are taxable and the imports of that business.
Current thresholds:
| Type of Registration | Threshold |
|---|---|
| Mandatory registration | AED 375,000 in taxable supplies and imports |
| Voluntary registration | AED 187,500 |
The mandatory threshold is assessed over the previous 12 months or based on a reasonable expectation that it will be exceeded within the following 30 days. Different rules tend to apply to non-resident businesses, this makes taxable supplies in the UAE where no other person is responsible for accounting for the VAT.
Deregistration of VAT in the UAE is simply a separate process that has its own conditions, and it is not an automatic consequence of trying to ease the operations of businesses. The taxpayer must complete the process that has been provided by the FTA through EmaraTax. Plus, the VAT consequences of deregistration, which include outstanding liabilities and adjustments that relate to affected assets, should be considered before submitting an application.
Related: VAT Return Filing Services
VAT Tax Groups
The law that surrounds VAT Tax Groups in the UAE allows qualifying persons to be able to register as a single taxable entity where the statutory conditions are met.
Cabinet Decision No. 52 of 2017 sets out the application process, which includes the appointment of a representative member. Note that the FTA can reject or refuse changes to a Tax Group where the statutory conditions are not satisfied.
Group registration requires more than establishing a corporate relationship between entities. What matters is that the legal conditions must be demonstrably met before an application will succeed.
Transactions Between Tax Group Members
Once a Tax Group is registered, the VAT treatment of transactions between its members changes. Under Article 12 of Cabinet Decision No. 52 of 2017:
- Supplies between members of the same Group may be disregarded for VAT purposes
- The supplies, imports, output and input tax are treated through the representative member of the Group
- All Tax Group members are jointly and personally liable for the representative payable taxes
Related Parties
There are certain rules contained in the VAT Regulations for the UAE for related parties. This involves persons whose economic, financial, or organisational relationships meet the statutory definition.
The VAT Law defines Related Parties by reference to the degree of control and separation between the persons that are involved. Where closely connected entities have not registered as a Tax Group, the Executive Regulation provides rules for aggregating certain related persons whose practices meet the statutory conditions.
Businesses with entities that are closely connected should distinguish between ordinary commercial transactions and arrangements that fall within the specific related-party provisions.
2026 Amendments on Input Tax Recovery
Several of the most significant UAE VAT Amendments 2026 actually concern input tax recovery. Each applies to a defined category of expense or transaction and carries its own effective date.
Cash Payment Restriction
From the 1st of October 2026, input tax recovery can be denied for supplies that exceed a value to be specified by the Minister where consideration has been paid or is intended to be paid, in cash.
Cabinet Decision No. 149 of 2026 introduces this restriction but does not specify what the monetary threshold will be. Businesses should not apply an assumed figure until the relevant Ministerial decision confirms the amount.
Employee-Related Expenses
The 2026 amendments revise how input tax recovery works for employee-related expenses, which include employer-provided accommodation.
Key changes from the 1st of October 2026:
- The previous reference to a “Designated Zone” is replaced with wording that refers to a free zone
- Employer-provided accommodation is excluded from input tax recovery unless it is mandatory under applicable Ministry of Human Resources and Emiratisation (MOHRE) decisions or directives
- Cases that involve contractual obligations or documented internal policies are subject to conditions the FTA will specify
Businesses should be able to review their employment arrangements and internal expense policies to confirm how input tax recovery applies after the amendment takes effect.
Capital Assets
The definition of a capital asset for purposes of the Capital Assets Scheme has been revised under the amended Article 57.
The key changes include:
- Previous wording: based on a single item of expenditure
- Amended wording: a business asset with a cost of AED 5 million or more
The existing useful-life law for qualifying assets is retained. Businesses with major capital expenditure should be able to assess whether their affected assets fall within the revised definition, and update their Capital Assets Scheme records accordingly.
Input Tax Apportionment
Businesses that make supplies and do not all carry the same right to input tax recovery may need to apportion residual input tax. Cabinet Decision No. 149 of 2026 also revises the standard method for this calculation.
What changes:
- Old method: ratio based on recoverable input tax compared to total input tax
- New method: ratio based on the value of supplies that carry input tax recovery compared to the value of all supplies
Note that certain amounts are excluded from the calculation under the amended provisions.
What does not change: the existing methodology for government entities and charities is retained.
When it applies: the revised Article 55 provisions do not take effect on the 1st of October 2026. They actually apply from the first Tax Year that commences after the 1st of October 2027.
Businesses that have been affected by the change should use the intervening period to model the financial and administrative impact before their first affected Tax Year arrives.
Also check: VAT Consultants in UAE
Summary of 2026 Amendments by Provision
| Provision | Principal Amendment | Effective Date |
|---|---|---|
| Article 4 | There are now single composite supply rules for economically inseparable components | 1st of October 2026 |
| Article 29 | It actually clarifies how the cost of acquisition is treated under the Profit Margin Scheme | 1st of October 2026 |
| Article 41 | Updates the treatment of pharmaceutical products and medical equipment | 1st of October 2026 |
| Article 52 | It replaces “less than a month” with “less than 30 days” | 1st of October 2026 |
| Article 54 | Puts a restriction on input tax recovery for qualifying cash payments above a future threshold | 1st of October 2026 |
| Article 57 | Changes the definition of a capital asset | 1st of October 2026 |
| Article 60 | Adds a required “Tax Credit Note” to appear clearly on credit notes | 1st of October 2026 |
| Article 55 | It changes exactly how the standard residual input tax apportionment is done | First Tax Year after 1st of October 2027 |
VAT Compliance and Record-Keeping After the Amendments
The obligations that are attached to VAT compliance extend beyond simply being able to get the calculation right. Businesses need records that show why a transaction was classified and treated the way it was, and those records need to align with the amended rules from the relevant effective date.
Some of the documentation that is required varies by the type of transaction:
| Area | Records to Review |
|---|---|
| Composite supplies | Contracts, commercial terms, descriptions of bundled components |
| Employee-related expenses | Employment arrangements, internal policies, supporting invoices |
| Cash payments | Payment records and evidence or consideration paid |
| Capital assets | Acquisition documents, asset records, cost and VAT information |
| Input tax apportionment | Calculation methodology and underlying supply data |
| Medical products | Product classifications and supporting documents |
| Profit Margin Scheme | Purchase records, acquisition costs, related VAT treatment |
| Credit notes | Details of the original transaction and reason for the adjustment |
| Tax Groups | Membership records and transactions that are affected by group changes |
| Related Parties | Agreements and records that support the nature of the relationship |
The objective is not to create a separate filing system for every VAT rule. Instead, it is to ensure that the existing accounting records and commercial documents are sufficient to support the VAT treatment that is being reported to the FTA.
Businesses should also distinguish between requirements that are contained directly in the VAT legislation and additional procedures that have been introduced through FTA decisions or guidance.
The FTA publishes all current VAT legislation and related references through its official resources.
Conclusion
Cabinet Decision No. 149 of 2026 makes targeted but meaningful changes to the UAE VAT Executive Regulation. Most of which tend to take effect on 1st of October 2026. Article 55 apportionment follows later, taking effect from the first Tax Year after the 1st of October 2027.
The priority now for businesses is to be able to identify which amended provisions affect current processes and update them before the relevant date. Waiting until after the deadline before being able to assess the impact is not a compliant approach that should be followed.
Note that the threshold for cash payment remains outstanding. Do not apply an assumed figure until the Ministerial decision confirms the amount.
See also: Tax Agent in Dubai, UAE
Frequently Asked Questions (FAQs)
What is the UAE VAT Executive Regulation?
What is Cabinet Decision No. 52 of 2017?
When do the 2026 UAE VAT amendments take effect?
Does Cabinet Decision No. 149 of 2026 change the VAT registration threshold?
Does the 2026 amendment introduce a specific cash-payment threshold?
How are transactions between VAT Tax Group members treated?
Does the new Article 55 apportionment method apply from October 2026?
What should businesses review before the October 2026 amendments take effect?
Need Expert Advice?
Contact the team at Farahat & Co. for professional support and expert insights for businesses operating in the UAE.
How Farahat & Co. Can Help
Farahat & Co. helps businesses assess which of the 2026 Executive Regulation amendments affect their operations, review composite supply arrangements, employee expense policies, capital asset records, and apportionment methodology, and prepare for the October 2026 and October 2027 effective dates.
Contact Farahat & Co. today to discuss your VAT Executive Regulation compliance requirements.
