UAE Amends VAT Executive Regulation Under Cabinet Decision No. 149 of 2026

UAE Cabinet Decision No. 149 of 2026 has introduced substantial amendments to the Executive Regulation of Federal Decree-Law No. 8 of 2017 on Value Added Tax, taking effect from 1 October 2026. According to VATupdate, the revisions cover multiple areas, including medical products, profit margin scheme purchase price rules, capital asset definitions, and tax credit note rules.

A key update is the introduction of an anti-fragmentation rule. Under this provision, supplies comprising multiple interconnected components that cannot realistically be separated must be classified as a single supply, with the principal component determining the VAT treatment.

The amendments also deny input tax recovery for certain cash-settled transactions exceeding a monetary threshold that will be set by a forthcoming Ministerial Decision by the Minister of Finance.

Input tax recovery rules on employee benefits have been updated to require clearer evidential support. Input tax claims are permitted where benefits are mandatory under UAE labour or free zone law, or where provided under a contractual obligation or documented corporate policy, subject to Federal Tax Authority conditions. However, employer accommodation remains blocked unless mandated by Ministry of Human Resources and Emiratisation (MOHRE) directives.

Additionally, input tax recovery rules for financial services now apply a 30-day 'outside the State' test aligned with export zero-rating standards, replacing the previous one-month terminology.