11/09/2026
🔍 KKC UAE Insight Pulse - Friday Trivia #34
The UAE Cabinet has issued Cabinet Decision No. 149 of 2026, introducing important amendments to the Executive Regulation of VAT, effective from 1 October 2026 (with certain input tax apportionment provisions effective from the first tax year commencing after 1 October 2027).
Key developments
1. Input VAT recovery becomes increasingly evidence-driven
A new provision empowers restrictions on recovering Input VAT where consideration for supplies exceeding prescribed limits is paid or intended to be paid in cash, subject to conditions to be issued by the Minister.
Implication: Businesses relying on significant cash-based transactions should revisit payment processes and supporting documentation.
2. Composite supplies are now formally codified
The regulation now explicitly confirms that where multiple components are economically inseparable, they must be treated as a single composite supply and follow the VAT treatment of the principal component.
Implication: Businesses offering bundled products or services should reassess pricing structures, invoicing practices and VAT classifications.
3. Input tax recovery methodology has been redesigned
The input tax apportionment mechanism has been substantially refined, including new formulas for calculating recoverable input tax and a dedicated methodology for Government Entities and Charities.
Implication: Partial exemption calculations may require process and system updates before the new rules become effective.
4. Healthcare supplies expanded
The zero-rating rules now extend beyond specified medical products to include goods supplied in the course of providing zero-rated healthcare services where they are necessary for the provision of such services.
5. Employee-related input tax recovery clarified
The revised provisions provide additional clarity around employee-related expenses, including circumstances where contractual obligations, documented policies, and labour law requirements may support input tax recovery.
Official Legislation - https://lnkd.in/duixeMim
💡 Insight Pulse Takeaway
This amendment reflects the UAE's continued shift toward a more robust, documented and governance-driven VAT environment. Beyond the technical changes, the broader message is clear: VAT recovery is increasingly linked to commercial substance, transaction transparency and disciplined compliance processes rather than relying solely on invoice-based support.
Businesses should not treat these amendments as routine legislative updates. Now is the right time to review:
Vendor and payment processes
Input VAT recovery policies
Employee expense frameworks
Composite supply assessments
Partial exemption methodologies
