Gulf Sovereign Inflows to China Surge 190% as UAE Revises VAT Rules

Data released on October 22, 2026, by Global SWF indicated that sovereign wealth funds deployed $14.2 billion into mainland China and Hong Kong during the first nine months of the year, representing a 190 percent increase compared to 2025. Gulf sovereign funds accounted for nearly 70 percent of all sovereign capital inflows into Chinese assets. UAE entities provided substantial allocations, with the Abu Dhabi Investment Authority committing $2.5 billion and Mubadala deploying $800 million, focusing primarily on artificial intelligence hardware, biotechnology, consumer markets, and advanced manufacturing ventures.

In the UAE, Cabinet Decision No. 149 of 2026 has amended the VAT Executive Regulation, introducing a revised standard method for input tax apportionment for businesses conducting both taxable and exempt activities. Under the updated approach, eligible taxable persons will calculate their recovery percentage using the value of qualifying supplies rather than the existing standard input-tax-based calculation, rounding the resulting figure to the nearest whole number before applying it to residual input VAT.

The amended rules mandate that certain transactions must be excluded from the percentage calculation. These include supplies of capital assets attributable to the taxable person, as well as receipts of concerned goods and services accounted for under the reverse-charge mechanism. Government entities and charities will follow a distinct method under Article 55, comparing directly recoverable input tax to the total of directly recoverable and non-recoverable input tax.

Although multiple amendments introduced by Cabinet Decision No. 149 of 2026 took effect on October 1, 2026, the revised input tax apportionment mechanism will apply from the first tax year commencing after October 1, 2027. Businesses whose tax year starts on January 1 are expected to implement the updated calculation method starting January 1, 2028.