UAE Updates VAT Rules for Cash Payments, Employee Accommodation and Medical Products

The UAE has introduced amendments to the VAT Executive Regulations through Cabinet Decision No. 149 of 2026, bringing greater clarity to several VAT rules and strengthening tax compliance.

Key VAT Changes

1. Restrictions on Input VAT for Large Cash Payments
One of the key changes relates to cash payments and Input VAT recovery. Under the amended rules, businesses may face restrictions on recovering Input VAT related to certain cash payments when the payment exceeds a specified threshold.

The exact threshold has not yet been announced. It will be determined separately through a decision issued by the Minister of Finance. Businesses should therefore monitor further announcements and review their cash-payment practices to ensure continued VAT compliance.

2. Employee Accommodation
The amendments clarify the VAT treatment of employee accommodation, particularly when determining whether related Input VAT can be recovered.

3. Medical Products
VAT rules covering the supply and import of medical products have been updated to align with the UAE's revised healthcare legislation.

4. Input VAT Apportionment
The methodology for apportioning Input VAT has been refined to better reflect the nature of a taxable person's economic activities. The existing methodology for government entities and charities remains unchanged.

5. Capital Assets Scheme
The amendments clarify the scope and application of the Capital Assets Scheme, helping businesses apply VAT rules to qualifying long-term business assets more consistently.

6. Single Composite Supplies
New provisions clarify the VAT treatment of single composite supplies, with the approach focusing on the economic substance of the overall supply rather than treating each element separately.

What Businesses Should Know

These amendments do not change the standard VAT rate. Instead, they focus on how VAT is applied and how businesses manage compliance.

Businesses should review their VAT processes, particularly in relation to cash payments, employee accommodation, medical products, Input VAT apportionment, capital assets and composite supplies, and stay updated on further decisions and guidance from the relevant authorities.

The changes aim to improve tax transparency, consistency and compliance, while reducing uncertainty and potential VAT disputes.

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