Compliance
Navigating the UAE’s Recent VAT Amendments: What Businesses Should Know
The UAE’s latest updates to its VAT regulatory framework introduce key changes affecting input tax recovery, composite supplies, and apportionment methods—important for businesses to understand and implement.
By NomadicTax Research Team • 5-8 min read • September 16, 2026
## Overview of Cabinet Decision No. 149 of 2026
On **September 8, 2026**, the UAE Ministry of Finance issued *Cabinet Decision No. 149 of 2026*, amending the Executive Regulation of Federal Decree‐Law No. 8 of 2017 on Value Added Tax (VAT). Key goals include improving transparency, aligning with international best practices, and enhancing administrative efficiency. ([mof.gov.ae](https://mof.gov.ae/en/news/ministry-of-finance-announces-amendments-to-the-vat-executive-regulation/?utm_source=openai))
## Major Changes to Expect
### 1. **Input Tax Recovery & Cash Payment Limits**
- Restrictions are being introduced on recovering input VAT for **cash payments exceeding thresholds** (thresholds to be set by a future Ministerial Decision). ([mof.gov.ae](https://mof.gov.ae/en/news/ministry-of-finance-announces-amendments-to-the-vat-executive-regulation/?utm_source=openai))
- Businesses should anticipate revising their payment policies to shift high‐value payments into traceable methods.
### 2. **Single Composite Supply Treatment**
- The amendments clarify how “single composite supplies” are treated based on **economic substance**, not just form. Complex bundled offers must meet substance tests. ([mof.gov.ae](https://mof.gov.ae/en/news/ministry-of-finance-announces-amendments-to-the-vat-executive-regulation/?utm_source=openai))
### 3. **Input Tax Apportionment Method Shifts**
- Moves from an **input‐based partial exemption method** to a **turnover‐based method** as the standard for apportionment among partially exempt businesses. ([grantthornton.ae](https://www.grantthornton.ae/insights/alerts/vat-alert-cabinet-decision-no.-149-of-2026/?utm_source=openai))
- Annual adjustments remain where discrepancies exceed AED 250,000.
### 4. **Clarified Definitions & Schemes**
- **Capital asset**: Threshold of AED 5 million introduced for assets subject to Capital Assets Scheme.
- **Medical products**: Existing definitions of pharmaceutical goods and medical devices are consolidated under one term “medical products.”
- **Outside the State test**: Financial services export test clarified as “less than 30 days” duration.
- **Profit Margin Scheme** adjustments so input VAT included in purchase price must be clearly supported. ([grantthornton.ae](https://www.grantthornton.ae/insights/alerts/vat-alert-cabinet-decision-no.-149-of-2026/?utm_source=openai))
## Actionable Steps for Businesses
- Review all **payment policies**, especially cash disbursements, high‐value purchases, and internal control practices.
- Assess whether composite supplies currently offered under “bundled pricing” meet the new substance criteria.
- If you’re partially exempt (e.g., banking, insurance, real estate, mixed‐use development), re‐model input tax recovery under turnover‐based apportionment.
- Ensure that records, invoices, and contracts reflect the updated definitions (capital assets, medical products, etc.).
## Practical Example
A mixed‐use development company that incurs VAT on shared overheads previously allocated via input tax usage might see changes. Under the turnover method, allocations might shift, potentially decreasing recoverable input tax if non‐taxable turnover increases.
## Timeline to Monitor
- Some changes are **effective immediately** or from the decision date. Others will require implementing regulations and thresholds from **forthcoming Ministerial Decisions**.
- Full compliance expected as soon as supporting rules are issued. Businesses should follow releases from the Federal Tax Authority (FTA) and MoF closely.
By proactively adapting to these regulatory shifts, businesses in the UAE can maintain compliance, optimize VAT recovery, and avoid unexpected exposures.