UAE changes VAT rules for cash payments, staff housing and medical products

Dubai businesses will see amendments to VAT rules concerning cash payments, employee housing, medical supplies, and input tax recovery according to new Ministry of Finance amendments published on Tuesday. The Executive Regulation of Federal Decree-Law No. 8 of 2017 on Value Added Tax is being updated through Cabinet Decision No. 149 of 2026.

The aim of these changes is to simplify procedures, clarify rules for taxable individuals, and reduce tax disputes. One of the amendments introduces restrictions on the recovery of input tax for cash payments that exceed limits to be determined separately by the Minister of Finance, with the objective of enhancing compliance and curbing tax evasion.

Employee housing and input tax recovery are further clarified, with specific guidelines on how these should be treated for input tax recovery purposes, particularly relevant for businesses providing housing to their employees. The methodology for apportioning input tax is also refined to better reflect the nature of a business's economic activities.

The treatment of medical products remains updated to align with the UAE's healthcare sector legislation. The Capital Assets Scheme's scope is clarified to stay consistent with the VAT Law. New provisions also address the VAT treatment of single composite supplies, with tax applied based on the economic nature of the transaction.

The Ministry of Finance's review of the wider VAT framework seeks to enhance tax transparency, streamline implementation, and align the VAT system with international standards, ensuring businesses can comply effectively as the economy and legislation evolve.