New Article 54(3) of the Executive Regulation — inserted by Article 2 of Cabinet Decision No. 149 of 2026 A new Clause 3 has been added to Article 54, providing that Input Tax may not be recovered on any supply whose value exceeds an amount to be specified in a decision of the Minister of Finance, where the consideration for that supply is paid, or intended to be paid, in cash. The restriction will apply in accordance with controls that the Minister’s decision will set out. At the date of this Decision, the Minister has not yet issued the decision specifying the monetary threshold or the accompanying controls. Until that decision is published, businesses will not know the exact cash-payment limit above which Input VAT becomes irrecoverable.
What businesses should do now
• Review purchasing policies for large cash transactions (property, vehicles, equipment, precious
metals, contractor payments, etc.).
• Watch for the Ministerial Decision that will set the actual AED threshold and the conditions
attached to it.
• Consider shifting large-value payments toward bank transfers, cheques or card payments to
preserve Input VAT recovery once the rule takes effect. Effective date: 1 October 2026.
2. Employee Benefits and Input VAT Recovery
Amended Article 53(1)(c)(1) and (2) of the Executive Regulation — amended by Article 1 of Cabinet Decision No. 149 of 2026 Article 53 deals with goods and services deemed to be used by a Taxable Person for a non-business (and therefore generally non-recoverable) purpose when provided to employees. The amendment refines the two situations in which Input VAT on such employee benefits nonetheless remains
recoverable:
• Where providing the goods or services to employees is mandatory under UAE labour law, or the
labour rules of any financial or non-financial free zone — except that employer-provided accommodation is now excluded from this exception, unless that specific accommodation is itself mandated by a decision or directive of the Ministry of Human Resources and Emiratisation.
• Where there is a contractual obligation or a documented company policy to provide the goods or
services to employees, applied in accordance with cases and conditions that the Federal Tax Authority (FTA) will specify. In short, the amendment narrows the automatic “mandatory under labour law” exception for staff accommodation specifically, while formalising a separate route to recovery based on a written contractual obligation or HR policy — provided the FTA’s conditions are met.
What businesses should do now
• Review employment contracts and HR policies to ensure employee-benefit entitlements are
clearly documented in writing.
• Reassess Input VAT positions taken on staff accommodation costs, distinguishing accommodation
that is itself legally mandated from accommodation provided as a general benefit.
• Watch for FTA guidance clarifying the “cases and conditions” for recovery under a contractual
obligation or documented policy. Effective date: 1 October 2026.
3. Tax Credit Note — Labelling Requirement
Amended Article 60(1)(a) of the Executive Regulation — amended by Article 1 of Cabinet Decision No. 149 of 2026 The amendment confirms that a Tax Credit Note must clearly display the words “Tax Credit Note” as one of its mandatory particulars, aligning the drafting with the equivalent Tax Invoice labelling requirement.
What businesses should do now
• Check credit note templates and billing system configurations to ensure the required wording
appears clearly on every Tax Credit Note issued. Effective date: 1 October 2026.
4. New Rule on Composite (Single) Supplies
New Article 4(6) of the Executive Regulation — inserted by Article 2 of Cabinet Decision No. 149 of 2026 A new Clause 6 has been added to Article 4, confirming that a Taxable Person may not treat a supply made up of more than one component as multiple separate supplies where the nature and economic substance of the supply show that the components are interconnected and cannot reasonably be separated. In that case, the whole arrangement is treated as a single composite supply, and the VAT treatment (standard-rated, zero-rated or exempt) follows the tax treatment of the supply’s principal component. This formalises, at Executive Regulation level, a principle the FTA has long applied through guidance: bundled offerings that are genuinely inseparable in substance should not be artificially split into components taxed differently, purely to obtain a more favourable VAT outcome.
What businesses should do now
• Review bundled product and service offerings (e.g., mixed-rate packages, subscriptions with
ancillary items) to identify the principal component.
• Reassess invoicing and system logic that currently splits bundled supplies into separate VAT
treatments.
• Document the commercial rationale for any supply still treated as multiple separate supplies, to
support that position if reviewed. Effective date: 1 October 2026.
Disclaimer
This article is a summary of the Cabinet Decision No. 149 of 2026 issued by the authority and is provided for general informational purposes only. It does not constitute professional tax or legal advice. Tax laws and their interpretation by the FTA are subject to change.