Dubai, UAE: UAE businesses are facing several important VAT changes from 1 October 2026, with new rules affecting input VAT recovery, cash payments, employee expenses, supplier checks and other parts of the VAT framework. The changes mainly come from Cabinet Decision No. 149 of 2026, while FTA Decision No. 13 of 2026 introduces separate requirements for checking the validity and integrity of supplies.
The latest updates mean businesses should review their VAT compliance processes before the new rules take effect. The changes are not limited to one type of transaction. They cover several areas that can affect how businesses record expenses, recover input VAT and manage their tax compliance.
New Rules Can Affect Input VAT Recovery
One of the key changes concerns cash payments. Under the amended VAT rules, input tax recovery will be restricted where a supply exceeds a threshold that will be prescribed by the Minister of Finance and the consideration is paid, or intended to be paid, in cash.
The exact cash threshold has not yet been prescribed. Businesses should therefore avoid relying on unofficial figures and should monitor the next regulatory update.
Another important development is FTA Decision No. 13 of 2026. From 1 October, taxable persons must follow specified measures and conditions to verify the validity and integrity of supplies before deducting input tax. The decision is separate from the cash-payment rule, but it adds another area that businesses need to consider when reviewing their tax compliance processes.
Employee Expenses and Other VAT Changes
The new framework also clarifies the treatment of employee accommodation for input tax recovery. FTA Decision No. 17 of 2026 sets out cases and conditions for recovering input VAT on employee expenses.
Cabinet Decision No. 149 also introduces changes covering the Capital Assets Scheme, the treatment of single composite supplies, medical products and input tax apportionment. The Ministry of Finance says these amendments are intended to provide greater clarity and improve the implementation of the VAT system.
Not every change has the same start date. The revised input tax apportionment methodology has a later application date, beginning with the first tax year starting on or after 1 October 2027. Businesses should therefore distinguish between the changes that apply from October 2026 and those that come later.
What Happens If Businesses Do Not Prepare?
Businesses that do not review their processes could face problems when applying the new input VAT rules. For example, a cash payment that falls within the future prescribed threshold could affect the related input tax recovery. Failure to carry out the required supply checks could also create issues where the conditions for input VAT deduction are not met.
The key risk is not that every business will lose VAT recovery. Rather, businesses need to make sure their transactions, records and procedures meet the relevant requirements.
What Should Businesses Do Now?
Businesses should review their VAT records, supplier verification procedures, accounts payable processes and employee expense treatment before 1 October.
They should also review how cash payments are handled, prepare for the new supplier checks and monitor further guidance on the cash threshold. Clear bookkeeping records and supporting documents will be important when reviewing VAT claims.
Businesses should also make sure their wider VAT and tax compliance processes are aligned with the updated requirements. Where businesses need help assessing how the changes affect their specific transactions, professional business tax advisory support can help them review the relevant areas before the new rules take effect.
Businesses subject to the UAE e-invoicing system should also keep the separate 30 October 2026 Accredited Service Provider appointment deadline in view. The Ministry of Finance has confirmed that businesses with annual revenue above AED 50 million must appoint an Accredited Service Provider by that date, while mandatory implementation remains set for 1 January 2027.
How DBTA Can Help
With several VAT developments arriving at different stages, businesses need a clear view of which rules apply to them and when.
Dubai Business and Tax Advisors (DBTA) can support businesses with VAT compliance, bookkeeping, accounts payable and receivable, and business tax advisory. Its advisory approach can help businesses review their records, understand relevant VAT requirements and prepare their processes for regulatory changes.
For UAE businesses, 1 October 2026 is an important compliance date. Preparing now can help ensure that VAT processes are ready for the changes ahead.
