VAT on cash payments and petty cash in the UAE: the input tax block from 1 October 2026

The short answer

From 1 October 2026, you cannot recover input VAT on a supply whose value exceeds an amount set by the Minister of Finance where the consideration is paid, or intended to be paid, in cash. The rule is new Article 54(3) of the VAT Executive Regulation, added by Cabinet Decision No. 149 of 2026, and the threshold itself sits in a separate Ministerial Decision that had not been published as of 15 September 2026.

Small cash purchases are not affected by the new block unless they exceed that threshold, but they still need a valid tax invoice, usually a simplified one, before any VAT can be claimed. Large supplier payments made in cash are the real exposure, and the safe course is to move them to bank channels before October.

What the rule says, and what is still pending

Cabinet Decision No. 149 of 2026 was issued on 1 September 2026 and announced by the Ministry of Finance on 8 September. It amends Cabinet Decision No. 52 of 2017, the Executive Regulation of the VAT law. The Ministry described the cash provision as a restriction on recovering input tax where cash payments exceed thresholds to be prescribed in a decision of the Minister of Finance, aimed at strengthening compliance and reducing evasion risk.

In the consolidated Executive Regulation published by the FTA, Article 54(3) reads, in the unofficial English translation, that input tax may not be recovered on any supply which has a value exceeding the amount specified in a decision issued by the Minister, where the consideration is paid or intended to be paid in cash, in accordance with the controls specified in that decision.

Two things are therefore missing: the AED figure and the controls. The FTA legislation page listed no Ministerial Decision on cash payments as of mid-September 2026, and press and adviser coverage up to 13 September describes the threshold as not yet set. Until it is issued, nobody can say with certainty which purchases are caught, but the provision itself is in force from 1 October.

• It is a denial of recovery, not a timing rule. Settling in cash later does not delay the claim; it removes it.
• It sits alongside the existing blocked categories in Article 53, such as entertainment and certain motor vehicles, rather than inside them.
• It applies per supply, measured against the value of the supply, not the size of the cash payment.

How it connects to FTA Decision No. 13 of 2026

FTA Decision No. 13 of 2026, issued on 22 July 2026 and effective from 1 October 2026, sets the checks a business must run on suppliers and supplies before deducting input tax, under Article 54(bis) of the VAT law. Article 4(2)(b) of that decision says the consideration shall be paid by electronic means, and that a cash payment must rest on a documented commercial reason, be made within the thresholds in the applicable tax legislation and be easily verifiable.

Read together, the two rules point the same way. Above the Minister's threshold, cash loses recovery outright under Article 54(3). Below it, a cash payment to a supplier covered by Decision 13 still needs a written commercial reason and a verifiable trail. Decision 13 lets you skip its checks for supplies under AED 10,000 excluding VAT, but not where purchases from that supplier exceed AED 100,000 over the previous 12 months or are expected to over the next 12.

What counts as cash, and the open questions

The Executive Regulation does not define cash, and the controls that might define it are in the Ministerial Decision that has not been issued. The only nearby signal is Decision 13, which contrasts payment by electronic means with payment in cash. Until the Ministerial Decision or FTA guidance says more, treat the points below as open and document the position you take.

• Banknotes and coins handed to the supplier: plainly cash.
• Bank transfers and payments by company card: electronic and traceable, and on any ordinary reading not cash.
• An employee paying a supplier with a personal card and being reimbursed: the supplier is paid electronically, so the supply looks card-settled, but keep the card slip with the claim. If the employee paid in cash, the reimbursement route does not change that.
• Cheques: neither cash nor electronic in the everyday sense. They leave a bank trail, but the text does not settle how they are treated.
• Cash deposited by you into the supplier's bank account: the money reaches a bank, but it starts as cash. This is a likely target of the controls and should not be relied on as a workaround.
• Part cash, part transfer: the text measures the value of the supply, not the cash portion. On a literal reading, a large supply partly settled in cash could lose recovery on the whole supply. Advisers have flagged this as unresolved.
• Intended to be paid in cash: the block can apply before any money moves. Cash on delivery terms, or a quote stating cash payment, are the obvious evidence of intent.
• Whether the threshold is measured including or excluding VAT, and how supplies straddling 1 October are treated, are also for the Ministerial Decision to settle.
• Splitting one purchase into several invoices to stay under the threshold is risky. It invites a composite-supply or commercial-substance challenge, and the controls may aggregate related supplies.

Petty cash in practice

Most petty cash spending is small: stationery, fuel top-ups, courier fees, site consumables, refreshments. Unless the Minister sets a very low threshold, these purchases will sit below the Article 54(3) line. The rules that already decide recovery on them still apply, and they are where most petty cash VAT is lost today.

• You need a tax invoice to recover input VAT. A registered supplier may issue a simplified tax invoice to a registered customer where the consideration does not exceed AED 10,000, under Article 59(5)(b). It must show the words Tax Invoice, the supplier's name, address and TRN, the date, a description, and the total consideration with the tax charged in AED.
• A till slip without a TRN, a handwritten receipt or a card terminal slip on its own is not a tax invoice. No VAT is recoverable on it.
• Many small vendors are not VAT registered, and some supplies, such as local passenger transport, are exempt. There is no input VAT to recover on those, whatever the payment method.
• Staff reimbursements: the supplier's invoice should be addressed to, or at least support a claim by, the business, and the expense must be for business purposes. Employee-benefit costs follow the separate Article 53 rules, which changed for staff accommodation on the same date.
• Site cash and project floats: this is where cash payments above any likely threshold happen, for subcontractors, equipment hire, materials and labour camps. These flows need moving to bank channels first.
• Record the settlement method on every petty cash line, not just the amount, so the Article 54(3) test can be run once the threshold is known.

Worked example

The threshold has not been set, so this example uses T for whatever amount the Ministerial Decision specifies. The purchases are illustrative. A VAT-registered contractor makes four purchases in October 2026, each with a valid tax invoice from a registered supplier, and each supplier has passed the Decision 13 checks where they apply.

• Purchase A: scaffolding hire, AED 60,000 plus AED 3,000 VAT, paid by bank transfer. The payment method does not block recovery. AED 3,000 is recoverable under the normal rules.
• Purchase B: the same hire from another supplier, AED 60,000 plus AED 3,000 VAT, paid in cash on site. If AED 60,000 exceeds T, the AED 3,000 is not recoverable and becomes a cost of the project. If T is set above AED 60,000, Article 54(3) does not bite, but Decision 13 still requires a documented commercial reason for paying in cash.
• Purchase C: site consumables from a hardware shop, AED 800 plus AED 40 VAT, paid from petty cash with a simplified tax invoice. Unless T is set below AED 800, the AED 40 is recoverable. Without a simplified tax invoice it is not, whatever T is.
• Purchase D: equipment repair, AED 60,000 plus AED 3,000 VAT, with AED 10,000 paid in cash and the rest by transfer. On the literal reading, if AED 60,000 exceeds T, the whole AED 3,000 is at risk, not just the VAT on the cash part. Until guidance is issued, settle supplies like this entirely by bank.

Checklist before 1 October 2026

• Map every place cash leaves the business: petty cash boxes, site floats, driver and courier cash, cash on delivery, subcontractor and labour payments, retail and food and beverage purchasing.
• Rank those flows by supply value, not payment size, and flag any single supply that could plausibly exceed a threshold.
• Add a settlement method field to every purchase record: bank transfer, company card, personal card reimbursed, cheque, cash, mixed.
• Write a petty cash policy: a float limit, a cap on any single cash payment, a requirement for a tax invoice with a TRN, and a named approver.
• Change supplier payment terms and purchase orders so large suppliers are paid by transfer, and remove cash on delivery for anything above a small amount.
• Write down the commercial reason for any cash payment that remains, as Decision 13 requires, and keep the evidence with the invoice.
• Set up the Decision 13 supplier checks and the written policy naming who runs, reviews and supervises them.
• Watch for the Ministerial Decision, then apply the threshold and controls to purchases from 1 October and review anything already claimed.

How Hysaab applies this

As set out in our guide to Cabinet Decision 149 of 2026, the tax agent tests every inbound invoice against the Article 59 tax-invoice checklist before input VAT is claimed. From 1 October 2026 it also records the settlement method on every purchase and holds the input VAT on cash-settled supplies above the threshold once the Ministerial Decision sets it. Every hold names the rule and the missing evidence, and a person makes the call.

Questions people actually ask

Keep reading

• Guide: Cabinet Decision 149 of 2026: what changes for UAE input VAT recovery from 1 October 2026
• Guide: What makes a valid UAE tax invoice — the Article 59 checklist
• Guide: Input VAT you cannot recover in the UAE