Dubai, UAE: UAE businesses need to review how they handle cash payments as new VAT rules take effect from 1 October 2026. The change comes under Cabinet Decision No. 149 of 2026, which introduces amendments to the UAE VAT Executive Regulation.
One of the key changes concerns input VAT recovery on cash-paid supplies. Where a supply exceeds a threshold that will be set by the Minister of Finance and the consideration is paid, or intended to be paid, in cash, the related input tax will not be recoverable under the new rule. The exact cash threshold has not yet been prescribed.
What Is Changing on 1 October?
The new rule does not mean that every cash payment will result in the loss of input VAT.
The restriction applies to supplies that meet the conditions set out in the amended VAT rules, including the future monetary threshold and payment in cash. Since the threshold will be set through a separate Ministerial Decision, businesses should not rely on an assumed AED limit.
This is important for businesses that regularly make supplier payments, purchase goods or services, or manage high-value business expenses. Their VAT compliance processes will need to account for the new restriction once the threshold is prescribed.
When Could Input VAT Recovery Be Affected?
A business could face an input VAT recovery issue where a transaction falls within the new cash-payment restriction.
For example, if a supply is above the prescribed threshold and the consideration is paid or intended to be paid in cash, the related input tax recovery will be restricted under the amended rules.
The key point for businesses is that the rule focuses on the payment method as well as the value of the supply. Companies should therefore review their accounts payable processes and how supplier payments are approved and recorded.
A Separate Supplier Verification Rule Also Starts
Businesses also need to prepare for FTA Decision No. 13 of 2026, which introduces measures and conditions for taxable persons to verify the validity and integrity of supplies. This is a separate development from the cash-payment restriction under Cabinet Decision No. 149.
FTA Decision No. 13 takes effect from 1 October 2026 and adds requirements around the verification of supplies before input tax is deducted.
Businesses should therefore review their supplier verification procedures alongside their payment controls. The two rules should not be treated as one requirement, but both form part of the wider VAT compliance changes taking effect in October.
What Should Businesses Do Now?
Businesses should begin reviewing their VAT records, supplier payment procedures and supporting documents before 1 October.
Their accounts payable and receivable processes should clearly show how supplier invoices are approved, paid and recorded. Businesses should also review which payments are made in cash and identify transactions that could potentially fall within the future threshold.
At the same time, companies should prepare to monitor the Ministerial Decision that will establish the cash-payment threshold. Until that threshold is officially prescribed, businesses should avoid relying on unofficial figures or assumptions.
Clear bookkeeping is also important. Payment records and supporting documents should be properly maintained so businesses can support their VAT treatment when reviewing input tax claims.
Why Businesses Should Prepare Early
The new rule does not remove input VAT recovery for all cash transactions. However, once the prescribed conditions apply, a cash payment that falls within the restriction could affect the related input VAT claim.
Early preparation can give businesses time to adjust their payment procedures and strengthen their tax compliance processes before the new rules apply.
Dubai Business and Tax Advisors (DBTA) can help UAE businesses review their VAT compliance, bookkeeping, accounts payable processes, and wider business tax advisory requirements. Professional support can help businesses understand how the new rules fit into their existing processes and prepare for the changes taking effect from 1 October 2026.
