UAE VAT changes: employee expenses and supplier verification

Employee costs: recovery depends on the purpose and conditions

Decision 17, issued on 9 September, implements article 53(1)(c)(2) of the VAT Executive Regulation. It covers six categories: business transport, remote-site food, operational accommodation, initial accommodation for new employees, work communications and business parking. Transport, remote-site food and operational accommodation have business-purpose and no-cash-alternative conditions. The accommodation category also restricts family use. New-employee accommodation is limited to 30 days; personal use of work communications must be incidental and insignificant, with a documented policy and monitoring. A contractual benefit or written policy alone does not establish recovery. For mandatory employee accommodation, Cabinet Decision 149 restricts the labour-law exception to accommodation required by Ministry of Human Resources and Emiratisation decisions or directives.^[1][2][4]

Supplier checks before deducting input VAT

Decision 13, issued on 22 July and effective on 1 October, requires checks of supplier identity and genuine activity, commercial authenticity and payments. Suppliers must generally be verified initially and when no check has occurred in the previous 12 months; individual supplies also require review. The exception for supplies below AED 10,000 excluding VAT does not apply where supplies from the vendor exceed AED 100,000 over the past or expected next 12 months. Where supplies from a vendor exceed AED 375,000 over the past or expected next 12 months, additional checks include written UAE bank-account confirmation and public-review assessment. Evidence and responsibility for checks must be documented.^[3]

The anti-evasion provision behind those checks

Decision 13 supports article 54 bis of Federal Decree-Law 8 of 2017, inserted by Federal Decree-Law 16 of 2025 and effective since 1 January 2026. The provision permits rejection of input VAT linked to evasion where the taxpayer should have known of the connection, including failure to undertake prescribed verification. Rejection is mandatory where knowledge is established.^[5][3]

Other VAT Executive Regulation amendments

Cabinet Decision 149 of 2026, issued on 1 September, amends Cabinet Decision 52 of 2017 from 1 October. Composite-supply treatment follows economic substance. Profit-margin purchase prices include fees and costs only where input VAT is unrecoverable; necessary goods supplied with zero-rated healthcare qualify for zero-rating. For recovery on qualifying overseas financial services, the recipient’s UAE presence must be under 30 days and unrelated to the supply. Qualifying capital assets include the AED 5 million boundary. Credit notes must display the prescribed label; cash-payment restrictions depend on ministerial thresholds and controls.^[4]

Apportionment changes have a later start

The output-value method for residual input VAT applies from the first tax year commencing after 1 October 2027. Capital-asset disposals and reverse-charge supplies are excluded from that ratio; government entities and charities retain an input-tax basis. The timing differs from the October 2026 start for the other amendments.^[4]

Implications for multinational groups

Group finance teams should align expense categories and evidence with Decision 17, assign responsibility for Decision 13 checks and assess the wider amendments against their transactions. The tax effect turns on satisfying recovery conditions and supporting deductions. Supplier onboarding, accounts payable and the timetable for changing apportionment methods therefore need to be considered together.^[2][3][4][5]