Updated: 23 October 2026 | A&A Associate LLC
Until last month, most UAE businesses treated input VAT as a paperwork question. If you had a valid tax invoice and the cost was for the business, you claimed the VAT back. Since 1 October 2026 that is no longer enough.
You now have to show that you checked the supplier and the transaction before you claimed. Free benefits for staff only qualify in six defined cases, each with its own conditions. And a separate rule will block VAT recovery on large purchases paid in cash, once the government sets the amount.
None of this changes what your suppliers charge you. It changes what you can recover. On a AED 1,000 purchase with AED 50 VAT, recovering the VAT keeps your cost at AED 1,000. If the claim is blocked, the purchase costs you AED 1,050. Spread that across a year of supplier invoices and staff benefits and the difference adds up.
This guide covers what changed, which of your costs are affected, and what to put in place before your next VAT return.
What changed on 1 October 2026
Three separate decisions took effect on the same day.
| Change | Legal source | Issued | Applies from |
|---|---|---|---|
| Supplier and transaction checks before deducting input tax | FTA Decision No. 13 of 2026 | 22 August 2026 | 1 October 2026 |
| Six categories of free employee benefits where input tax can be recovered, with conditions | FTA Decision No. 17 of 2026 | 9 September 2026 | 1 October 2026 |
| Input tax blocked on large cash-paid purchases (amount not yet set), plus other changes to the VAT Executive Regulation | Cabinet Decision No. 149 of 2026 | September 2026 | 1 October 2026 |
The VAT rate is still 5%, and the registration thresholds haven’t moved. These rules are about recovery, not about what you charge.
If you file monthly, your October return, due by 28 November, is the first one these rules apply to. Quarterly filers will meet them on the return for the quarter that includes October.
Supplier checks before you claim input VAT (Decision No. 13 of 2026)
This is the change that touches almost every VAT-registered business. Before you deduct input tax on a purchase, you need to have checked who you bought from, and whether the transaction itself makes sense.
When you have to check a supplier
You check a supplier the first time you deal with them. You check them again if you haven’t verified them in the previous 12 months. So a supplier you’ve used for years still needs a file, and that file needs refreshing once a year.
What to check
The checks depend on whether the supplier is a person or a company.
| Supplier | What you need |
|---|---|
| An individual (freelancer, sole trader) | A copy of a valid ID, such as an Emirates ID or passport. You also need to meet them, in person or by video, before the supply. |
| A company | Confirm it is incorporated, through an official register or a copy of its certificate of incorporation, and that the details match what you have. Check the ID of the director, agent or employee who represents it, and keep a copy. Confirm its business premises exist, online or by visiting, and that they fit what the company does. |
You also need to look for warning signs. Two are named: a supplier that changed its address or key staff more than twice in 12 months, and transactions that look too large or unusual for the supplier’s size and history. If either applies, you can still deal with the supplier, but you need a clear written explanation on file that you can show the FTA if asked.
For bigger suppliers there is an extra step. If you buy more than AED 375,000 from one supplier over 12 months, or expect to, you also need evidence of the supplier’s UAE bank account, and you should review public information about them and their business reputation.
Checking the transaction, not just the supplier
The decision also asks you to look at each purchase. Does it have a commercial reason? Is the price in line with the market? Is the supplier licensed for what they sold you? Where did the goods come from, and who owned them? If the supplier is a middleman, why are they in the chain?
The payment route matters too. Paying in cash, paying a third party, or paying into an account outside the supplier’s home country all need a justification on file.
The small-purchase exception
Purchases under AED 10,000 (before VAT) can skip these checks. The exception stops applying once your total purchases from that supplier pass AED 100,000 over the previous 12 months, or are expected to over the next 12. In practice, small one-off purchases are fine. A regular supplier you pay in small invoices is not.
Paperwork the FTA will expect
You need records of each check, and a written internal policy that says who carries out the checks, who reviews them and who supervises the process. If you can’t show the checks were done, the FTA can refuse the input tax.
For a trading company with a few hundred active suppliers, that is a real project. It’s worth starting with the suppliers you spend the most with and working down.
VAT on staff benefits: the six categories (Decision No. 17 of 2026)
Before October, a business could usually recover VAT on free benefits for staff if the benefit was in the employment contract or a written policy, and was necessary for the job or normal for that kind of employer. That general test has gone for this route. Now the benefit has to fit one of six categories and meet every condition in it.
| Benefit | Conditions (all must be met) |
|---|---|
| Transport | Only for travel between home and work, to client sites, or for other job duties. No personal use. The employee can’t choose a cash allowance instead. |
| Food and drink | The employee lives somewhere remote or isolated, with no cooking facilities or nearby restaurants. Provided only during the work or residence period. No cash alternative. |
| Staff accommodation | No cash alternative. Provided for operational reasons, not as part of pay. The job requires living near the workplace or site. For the employee only, not family, unless it is also their usual home. Basic and suited to the work, without significant leisure features. |
| Accommodation for new joiners | Temporary, for no more than 30 days. Basic and suitable for the role. |
| Mobile phone, data and internet | Needed for the job, including remote or out-of-hours work. Personal use is minor. A written usage policy is in place. The employer monitors use and keeps records when the policy is broken. |
| Parking | Only for business travel, client visits or similar work. A written policy on when parking is reimbursed and who approves it. Receipts showing the date, amount and VAT. |
A few things are worth spelling out.
Putting a benefit in a contract or staff handbook doesn’t make the VAT recoverable on its own. The arrangement still has to meet the conditions.
The cash alternative catches a lot of employers. If staff can choose a transport allowance instead of the company bus, or cash instead of accommodation, you lose the right to recover VAT on that benefit through this route. Some businesses will decide the flexibility is worth the VAT. That’s a fair choice, as long as it’s a deliberate one.
The rules don’t cut anyone’s salary or benefits. A company can keep providing a benefit it can’t recover VAT on. The VAT simply becomes part of the cost.
Phone and internet policies need a second look. An FTA clarification from 2021 expected work phones to be for business use only. The new decision covers home internet as well and accepts minor personal use, as long as there’s a written policy and evidence of monitoring. Policies written to the old standard may need updating.
Some routes sit outside these six categories. Benefits the employer must provide by law still have their own route. For accommodation, that now applies only where the obligation comes from a Ministry of Human Resources and Emiratisation decision or directive. Health insurance for employees, and for a spouse and up to three children under 18, is also covered by a separate provision.
Large cash payments and other changes (Cabinet Decision No. 149 of 2026)
Cabinet Decision No. 149 amended the VAT Executive Regulation. The change most businesses will notice is about cash.
Input tax can be blocked where a purchase is above an amount set by Ministerial decision and is paid, or meant to be paid, in cash. As of 23 October 2026, that amount hasn’t been published. Anyone quoting a figure is guessing.
This affects a business’s right to recover VAT. It doesn’t stop anyone paying cash for everyday purchases. But if you still settle larger supplier invoices in cash, now is a good time to move them to bank transfer. Cash payments also need a justification under the supplier checks above, so the habit costs you twice.
The same decision changed several other things, including composite supplies, some healthcare goods, the Profit Margin Scheme and the Capital Asset Scheme. New rules on apportioning input tax between taxable and exempt activities don’t start until the first tax year beginning on or after 1 October 2027.
Who is most affected
Some sectors will feel this more than others.
Construction, contracting, facilities management and logistics. Labour accommodation, staff buses and meals at remote sites are exactly what Decision 17 covers. Every arrangement needs checking against the conditions, and cash allowances need a decision.
Trading companies with many suppliers. The volume of supplier checks is the problem here, along with intermediaries and any supplier paid in cash.
Hospitality and retail. Staff meals and accommodation are common, and many won’t meet the remote-location test for food.
Professional services and tech firms. Phone, data and home internet allowances, and parking claims from sales teams.
Any business using freelancers or small suppliers. Individuals now need an ID copy and a meeting before the supply, which is easy to miss when someone is hired at short notice.
Gulf News reported that tax experts expect the extra cost to reach hundreds of thousands of dirhams a year for some large employers. That depends entirely on how much VAT a business was recovering on these costs, but it shows the size of the issue for bigger workforces.
Checklist for your next VAT return
- Start a verification file for every active supplier: ID or incorporation check, representative’s ID, and premises check.
- List suppliers above AED 100,000 and AED 375,000 a year. Get bank account evidence for the second group.
- Write and approve your internal verification policy, naming who does the checks, who reviews them and who supervises.
- Add the transaction questions (reason, payment route, price, licensed activity) to your purchase approval process.
- Map every staff benefit against the six categories. Where staff can choose cash instead, decide whether to remove the option or accept the VAT as a cost.
- Update your phone, internet and parking policies, and start keeping monitoring records and receipts.
- Stop paying large supplier invoices in cash.
- Review October’s purchases before you file, and don’t claim input tax that doesn’t meet the new conditions.
- If an earlier return claimed VAT it shouldn’t have, look at a voluntary disclosure. Correcting a mistake yourself costs far less than waiting for the FTA to find it. Our article on VAT mistakes Dubai businesses still make explains the penalty difference.
For context, these rules build on the VAT changes that took effect in January, which gave the FTA stronger powers to reject input tax with weak support and set a five-year limit on refunds. The October e-invoicing changes are a separate project, but the same finance team will usually handle both.
How A&A Associate can help
We run VAT health checks that now include supplier files and staff benefits. We can draft your supplier verification policy and set up the checks in your accounting system, and review your employee benefits against Decision 17. We also handle bookkeeping and VAT return filing, and voluntary disclosures where an earlier claim needs correcting.
Send us last quarter’s purchase ledger and your list of staff benefits. We’ll show you which claims are now at risk and what it would take to keep them. Our VAT consultants can start with a short call.
Disclaimer: This article is for general information only and is not tax advice. It is based on FTA Decisions No. 13 and No. 17 of 2026, Cabinet Decision No. 149 of 2026 and published professional summaries, as checked on 23 October 2026. VAT rules can change, and the cash payment threshold has not yet been published. Check the official FTA decisions or speak to a registered tax agent before changing how you claim input VAT.
