ME-ALLIANCE LEGAL UPDATE
Cabinet Resolution No. (149) of 2026 Amending Cabinet Resolution No. (52) of 2017 Concerning the Executive Regulation of Federal Decree-Law No. (8) of 2017 on Value Added Tax
Cabinet Resolution No. (149) of 2026 was issued to amend several provisions of Cabinet Resolution No. (52) of 2017 concerning the Executive Regulation of Federal Decree-Law No. (8) of 2017 on Value Added Tax (VAT).
The significance of the Resolution lies in the fact that it does not establish a new tax regime but rather refines several practical aspects of VAT implementation relating to input tax, composite supplies, healthcare services, capital assets, and government and charitable entities.
Amendment to the Scope of the Purchase Price
Article (29/5) has been amended to provide that the purchase price of goods includes, in addition to the basic price, the costs and fees associated with their acquisition, provided that the input tax incurred on such costs is recoverable.
This amendment broadens the range of elements included in determining the purchase price for VAT purposes.
Expansion of Zero-Rating in Healthcare
The Resolution amends Article (41/4) to expand the range of goods eligible for zero-rating when supplied in connection with healthcare services.
The application of the zero rate is no longer restricted to specified medical products but extends to goods necessary for the provision of healthcare services subject to zero-rated VAT treatment.
Amendment to the Concept of Being Outside the State
Article (52/2) has been amended to define more precisely the circumstances in which a person is considered to be outside the State.
A person is deemed to be outside the State where their presence within the State does not exceed 30 days and such presence is not effectively connected with the supply.
The amendment therefore introduces both a temporal criterion and a substantive connection test.
Amendment to Input Tax Relating to Employees
Article (53/1) has been revised to permit input tax recovery in a broader range of circumstances involving goods or services provided to employees, particularly where such provision is required under labor legislation or arises from a contractual obligation or documented policy, subject to the conditions and controls prescribed by the Federal Tax Authority.
Restructuring Input Tax Apportionment
The Resolution amends Clauses (6) and (7) of Article (55) to regulate the apportionment of input tax between supplies that permit recovery and those that do not, using a percentage-based methodology reflecting the actual nature of use.
A new Clause (19) has also been added to Article (55), establishing a specific mechanism for government entities and charitable organizations to determine the recoverable portion of input tax.
Amendments Concerning Composite Supplies and Capital Assets
A new provision has been introduced into Article (4) addressing supplies comprising several economically interconnected components.
Such transactions are treated as a single composite supply where their constituent elements cannot naturally be separated, with the applicable VAT treatment determined by reference to the principal component.
Article (57/1), concerning capital assets, has also been revised while retaining the minimum cost threshold of AED 5 million, excluding tax, and the minimum useful life requirements of ten years for buildings and five years for other assets.
Amendment to Tax Credit Notes
The Resolution also amends Article (60) by revising certain information and documentation requirements applicable to tax credit notes, reflecting developments in invoicing systems and tax documentation.
New Provisions Concerning Cash Payments
A new Clause (3) has been added to Article (54), restricting input tax recovery in certain circumstances where the value of a supply exceeds a threshold determined by the Minister of Finance and payment is made, or intended to be made, in cash, subject to the applicable conditions and controls.
What Has Changed Compared with the Previous Legislation?
The amendments do not directly modify Federal Decree-Law No. (8) of 2017 itself. Instead, they amend Cabinet Resolution No. (52) of 2017, which constitutes the Executive Regulation implementing that Decree-Law.
Accordingly, Federal Decree-Law No. (8) of 2017 remains the superior legislative framework, while the 2026 Resolution refines the practical application of several of its provisions.
Compared with the previous Executive Regulation, the principal changes include broadening the definition of purchase price, expanding zero-rated treatment for healthcare-related goods, tightening the criteria for determining whether a person is outside the State, revising input tax recovery rules for employee-related expenses, and restructuring input tax apportionment mechanisms.
Further amendments introduce specific rules for government and charitable entities, clarify the treatment of composite supplies, and impose additional restrictions on input tax recovery in certain cash payment transactions.
Legal and Regulatory Implications of the Resolution
The Resolution reflects a regulatory approach aimed at achieving greater precision in the application of VAT, particularly in areas previously subject to differing interpretations or requiring more detailed regulatory treatment.
It also places increased emphasis on internal documentation, the classification of supplies, the review of employee contracts, payment policies, and input tax recovery procedures.
Consequently, although the Resolution does not alter the fundamental structure of the VAT system, it introduces significant refinements to key compliance requirements directly affecting tax calculation, input tax recovery, the treatment of supplies, and the obligations of taxable persons.
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