UAE Issues Cabinet Decision No. 149 Amending VAT Executive Regulations

On 1 September 2026, the UAE Federal Tax Authority issued Cabinet Decision No. 149 of 2026, which amends provisions of Cabinet Decision No. 52 of 2017 governing the Value-Added Tax (VAT) Executive Regulations. The amendments establish that most provisions will take effect on 1 October 2026, while changes governing default input tax apportionment calculations will take effect from the first tax year beginning on or after 1 October 2027.

According to an alert published by EY, the decision alters the default input tax apportionment calculation from an input-tax-based method to an output-based method, excluding capital asset disposals and reverse-charge transactions. This apportionment change does not apply to government entities or charities. In addition, the regulations maintain the 5 million UAE dirham (AED 5m) threshold for qualifying capital assets under the Capital Asset Scheme.

Under the updated rules on employee benefits, input tax is recoverable if the benefit is legally mandated under applicable UAE or free zone labor legislation, including financial and nonfinancial zones. VAT recovery on employee accommodation remains restricted unless mandated by a directive of the Ministry of Human Resources and Emiratisation. Recovery may also be permitted under contractual obligations or documented policies subject to forthcoming conditions from the Federal Tax Authority.

The amendments also introduce restrictions on recovering input tax on cash transactions that exceed a forthcoming threshold to be established by the Ministry of Finance. Furthermore, the decision clarifies that economically inseparable elements of composite supplies must be treated as a single supply for VAT purposes, and updates provisions regarding profit margin computations and zero-rating for medical products.