UAE Amends VAT Rules on Input Recovery, Cash Payments and Composite Supplies

Cabinet Decision No. 149 of 2026 amends the UAE VAT Executive Regulations, with most changes effective 1 Oct. 2026.
The key change is a move from an input-based to an output-based method for residual input VAT recovery for businesses making both taxable and exempt supplies; this applies to financial institutions, real estate businesses, investment structures and certain holding companies, while government entities and charities keep the input-based method.
The new residual input VAT recovery method starts on 1 Oct. 2027, not 1 Oct. 2026; certain items such as supplies of capital assets and imported goods/services are excluded from the calculation.
Other changes include denial of input VAT recovery for cash payments above a ministerial threshold, new rules for input VAT on employee goods/services, and broader FTA authority to set recovery conditions.
The amendments also revise the composite supplies rules and adjust provisions on the VAT profit margin scheme, zero-rating of certain medical products, input VAT recovery for certain financial services supplied outside the UAE, capital assets, and tax credit notes.

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