UAE businesses relying on cash payments, staff accommodation or VAT recovery on employee benefits may need to review their arrangements before new VAT rules take effect on October 1.
The main change affects cash payments, with businesses potentially losing input VAT recovery on purchases above a yet-to-be-announced value when paid in cash.
The rule could impact businesses that continue to use cash across different stages of their supply chain.
Companies providing accommodation for large workforces may also see changes to VAT recovery.
Construction, hospitality, manufacturing, oil and gas, logistics and other sectors could be most affected due to significant staff housing costs.
Under the amended rules, VAT on employer-provided accommodation may not be recoverable unless the housing is specifically required by the Ministry of Human Resources and Emiratisation.
Businesses should review their VAT claims on accommodation, medical expenses and other employee benefits to ensure they meet the new requirements.
Most of the new VAT rules will take effect on October 1, 2026, giving businesses limited time to review payment processes, employment policies and VAT recovery practices.
Businesses should identify high-value cash payments and prepare to shift them to traceable payment methods once the government announces the threshold.
The revised methodology will apply from the first tax year starting after October 1, 2027, while government entities and charities will continue under a separate method.
