Issued on 1 September 2026, amending the VAT Executive Regulation (Cabinet Decision No. 52 of 2017), it touched almost every corner of input tax recovery in the UAE: bundled supplies, cash payments, employee benefits, and how partly-exempt businesses will soon calculate their recoverable share. The Ministry of Finance announced it on 8 September, and the alerts from KPMG and Grant Thornton landed within days. A month on, here is the honest stock-take: what is already live, what is still to come, and what to re-check before your next EmaraTax VAT return.

The Three Changes With Immediate Bite

Most of the Decision is clarification. Three provisions, though, change what finance teams must actually do differently — and all three are live now.

1. Bundled supplies: substance now beats form (Article 4(6))

The new composite supply VAT rule is the one with the widest reach. Where the components of a supply are commercially interconnected and inseparable in practice, the whole transaction is treated as a single composite supply taxed at the treatment of its principal component — even if the components are invoiced separately or priced separately. The FTA can now look beyond the contract to the economic substance of the deal.

This matters most where components would otherwise attract different VAT treatments — standard-rated, zero-rated or exempt. Splitting a commercially integrated bundle to secure a better rate no longer works on paperwork alone. If your business sells packages, bundles or combined services, the question to document now is simple: is there a genuine commercial reason these components are treated separately, or are they one supply in substance? Our UAE tax services team reviews exactly this kind of arrangement — and the documentation that defends it — as part of a VAT health check.

2. Cash payments can now block input tax recovery (Article 54(3))

The second live change is a genuine new restriction. Input tax is not recoverable where the consideration above a Ministerial threshold is paid — or intended to be paid — in cash. Until now, the method of payment did not by itself prevent recovery, provided the general conditions were met. That has changed, as part of the wider anti-evasion drive that also produced the supplier due-diligence rules discussed below.

One crucial unknown remains: the monetary threshold has not been published yet. It will be set by a separate Ministerial Decision, and until it lands, no business should work to a guessed figure — this post deliberately states none. The practical move in the meantime is unglamorous but effective: route significant payments through bank channels, tighten procurement and payment controls, and flag high-value cash purchases inside your VAT review process so the position can be assessed the moment the implementing rules are issued.

3. Check your credit note templates — literally (Article 60(1)(a))

The third is a one-line drafting correction with a very practical consequence. The words “Tax Credit Note” must now be clearly displayed on the credit note itself — the earlier text said “on the invoice”. The other content requirements for credit notes are unchanged. This is a five-minute check that catches real exposure: open your template, confirm the heading prints on the credit note document (not just on the invoice it relates to), and fix it if it does not. It is the cheapest item on this post’s re-check list, and the easiest to miss.

The Quieter Clarifications — Still Worth a Read

The rest of the October package clarifies rather than revolutionises, but several items affect specific sectors directly:

• Profit Margin Scheme (Article 29(5)): purchase-related costs and fees count in the purchase price only where their input tax is not recoverable under Article 54. No more double benefit — recovering the tax and using the same cost to shrink the taxable margin. Dealers need clear records of whether input VAT on each acquisition cost was recoverable.
• Healthcare zero-rating (Article 41(4)): pharmaceutical products and medical equipment are consolidated into a single category, “medical products”, as specified in a Cabinet Decision. Apart from that consolidation, the scope of qualifying supplies is substantively unchanged.
• The “outside the State” test (Article 52(2)): the vague “less than a month” is replaced with a precise “less than 30 days” — a recipient is treated as outside the UAE where their presence here does not exceed 29 days and is not effectively connected with the supply. A small wording change that removes real ambiguity for exported financial services.
• Employee goods and services (Article 53): the old “Designated Zone” reference is replaced with “any free zone, including financial and non-financial free zones”, widening the labour-law exception. But two cautions: employer-provided accommodation qualifies only where it is mandatory under a decision or directive of the Ministry of Human Resources and Emiratisation (MOHRE), and recovery under a contractual obligation or documented policy will now depend on cases and conditions the FTA has yet to specify — so do not rely on contracts or HR policies alone until that decision lands. Accommodation-adjacent costs (utilities, furniture, maintenance) are not expressly addressed and continue under the existing rules, including the FTA’s labour-accommodation clarification.
• Capital Asset Scheme definition (Article 57): a capital asset is now a “business asset with a cost” of AED 5 million or more excluding tax. The threshold, the VAT-payable requirement and the adjustment periods — 10 years for buildings, 5 years for other assets — are unchanged. Wording only, but check your scheme records use the new definition.

The 2027 Piece: Model Apportionment Now, Don’t Panic About It

VAT apportionment in the UAE is the Decision’s biggest structural change — and the one most often misreported as already live. From the first tax year commencing after 1 October 2027, the standard method for partly-exempt businesses moves from input-based to output-based (turnover-based): the recoverable share becomes (taxable supplies ÷ total supplies) × 100%, applied to residual input tax. Disposals of the business’s own capital assets and reverse-charge receipts are excluded, direct attribution is unchanged, and the annual adjustment process continues. Government entities and charities keep an input-based method under the new Article 55(19).

The impact will land hardest on partly-exempt businesses — banking, insurance, real estate, investment holding and mixed-use development — because a turnover-based percentage can differ considerably from an input-based one, with direct cash-flow consequences. The sensible response, with a full year of transition, is modelling: run the turnover-based method alongside the current method over a full tax year, strengthen direct attribution, and consider early whether a special apportionment method approved by the FTA would give a more representative result. That is a 2027 project with a 2026 start date — not an October emergency.

What Did Not Change

For all the column inches, two things every business asks about first did not move: the standard VAT rate stays at 5%, and the registration thresholds are unchanged — AED 375,000 mandatory, AED 187,500 voluntary. If your business is not yet VAT-registered and is approaching those thresholds, our VAT registration and filing guide covers the process step by step.

Same Month, Separate Instruments — Don’t Conflate Them

Two further instruments also took effect on 1 October 2026 and are often lumped in with CD 149. They are not part of it:

• FTA Decision No. 13 of 2026 — supplier and supply verification (“Know Your Supplier”): documented checks on suppliers, repeated every 12 months, encouraging electronic payments and restricting cash to limited, documented circumstances. It pairs directly with the new cash-payment block above.
• FTA Decision No. 17 of 2026 — a defined list of recoverable employee expenses, sitting alongside the Article 53 changes.
• Federal Decree-Law No. 16 of 2025 (Article 54 bis, from 1 January 2026) — the FTA may deny input tax where the business knew, or should have known, a supply was connected to tax evasion. The direction of travel is the same across all three: traceable payments, verified suppliers, documented positions.

The October Re-Check List: Six Checks Before Your Next VAT Return

No FTA clarification on CD 149 has been issued since 1 October, and there is no published evidence of what filers got wrong in October — so treat this list as the traps to avoid, not as reported errors:

1. Review bundled offerings. For every package or combined service, document whether components are genuinely separate or one composite supply in substance — and tax them accordingly.
2. Tighten payment controls. Route significant payments through bank channels, flag high-value cash purchases in your VAT review, and watch for the Ministerial Decision that will set the cash threshold.
3. Fix credit note templates. Confirm “Tax Credit Note” prints on the credit note itself, not only on the related invoice.
4. Document employee-benefit positions. Review accommodation arrangements against the MOHRE-mandatory test, and do not rely on contracts or HR policies alone for recovery until the FTA specifies its conditions.
5. Verify suppliers. Start (or refresh) the 12-monthly documented supplier checks under FTA Decision No. 13 — they are now part of the same compliance picture as the cash block.
6. Model apportionment for 2027. If you are partly exempt, run the turnover-based method in parallel for a full tax year now, so the 2028 switch holds no surprises — and assess whether a special method application is worth preparing early.

If any of these checks raises a question about your wider position — VAT filings that will soon reconcile against e-invoice data, corporate tax records, bookkeeping — that is exactly what our UAE tax services team handles. Our UAE e-invoicing guide and corporate tax guide cover the two frameworks most likely to interact with these VAT changes.

FAQs: UAE VAT Cabinet Decision 149