New Input Tax Recovery Rule Under Article 54(3)
In short: From 1 October 2026, Article 54(3) of the UAE VAT Executive Regulation, added by Cabinet Decision No. 149 of 2026, blocks input tax recovery on a supply above an amount the Minister of Finance will set, where it is paid or intended to be paid in cash. As at 29 September 2026, no amount has been issued.
On Thursday a new input tax rule takes effect for every VAT-registered business in the UAE, and nobody can tell you where its line is. The amount that triggers it is reserved to a Ministerial Decision that has not been published.
If you run a gold, jewellery or scrap business and pay some suppliers in notes, that is not a reason to ignore it. The clause has already fixed everything except the number, and what it fixes is harsher than the coverage so far suggests.
What the Rule Says, Word for Word
Cabinet Decision No. 149 of 2026, issued on 1 September 2026, adds this to Article 54 of the VAT Executive Regulation (Ministry of Finance, English text):
“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.”
The Decision takes effect on 1 October 2026 (Article 3(1)). Only the apportionment changes to Article 55 are deferred, to the first tax year starting after 1 October 2027 (Article 3(2)). The cash rule is not.
Why You Cannot Comply on 1 October, and Why It Still Matters
As at 29 September 2026, the Ministry of Finance’s legislation page lists no Ministerial Decision on cash payments. The newest tax item on it is Cabinet Decision No. 149 itself (MoF, Financial Legislation).
So on 1 October there is no amount for any supply to exceed, and Article 54(3) denies nothing, unless a decision is issued before then. Anyone quoting you a figure today is quoting something that has not been issued. Ask them where they read it.
That does not make cash a non-issue on 1 October. The FTA’s supplier-verification decision, FTA Decision No. 13 of 2026, applies from the same date according to PwC’s summary of it, which also lists cash payments among the payment arrangements that need a justification before input tax is deducted. Failing that check feeds Article 54 bis of the VAT Decree-Law, under which the FTA can refuse a deduction. So cash is already on the FTA’s checklist from Thursday. Article 54(3) will add the price.
And the clause has already fixed the parts that matter, apart from the number.
It Is a Cliff, Not a Tax on the Excess
Read the clause again: input tax “may not be recovered on any supply which has a value exceeding the amount”. The test is whether the supply is above the line. The consequence is the input tax on the supply. On the words, crossing the line by one dirham costs all of it.
An illustration, not a client case. A registered jewellery trader buys stock from a registered supplier for AED 60,000 plus AED 3,000 VAT at the standard 5% (Federal Decree-Law No. 8 of 2017, Article 3), and pays in notes. If AED 60,000 turns out to be above the Minister’s amount, the trader loses the whole AED 3,000, not 5% of the part above the line.
Four purchases like that a month is AED 12,000 of VAT a month. Over a year, AED 144,000 that stops being recoverable and becomes cost, for as long as payment stays in cash.
Which Value?
The Decree-Law measures the value of a supply without the tax. Where the supply “is for a cash consideration in whole”, its value is “the consideration less the tax” (Article 34(1)); otherwise the value “shall not include the tax” (Article 34(2)). If the Regulation uses “value” the way the Decree-Law does, the test is applied before VAT. That is a reading, not an FTA statement, but it is the natural one.
“Intended to Be Paid in Cash”: The Decision Is Made When You Book the Invoice
The new clause sits directly under Clause 2 of the same Article, which already says a business is treated as having paid for a supply “to the extent that the taxable person intends to make the payment before the expiration of six months after the agreed date for the payment” (VAT Executive Regulation, Article 54(2)).
Clause 3 uses the same idea: “paid or intended to be paid in cash”. Clause 2 allows input tax to be deducted before the supplier is paid, and it often is. So the question the rule asks will be asked at the moment you claim the VAT, and it is a question about how you meant to pay.
What happens if the plan changes after the return is filed, a bank payment that ends up in notes or the reverse, is not addressed in the clause. The controls in the Ministerial Decision may deal with it. Until then, the only defensible position is a record, made at the time, of how each supplier was to be paid.
What “Cash” Means Is Not Written Down
Cabinet Decision No. 149 does not define cash. Neither, in the sense this rule needs, does the Decree-Law.
It is worse than a blank. Article 34 of the Decree-Law already uses “cash consideration” to mean payment in money as opposed to payment in goods or services. On that meaning a bank transfer is cash. Article 54(3) cannot mean that, or it would block recovery on every large supply in the country. So the word has to mean something narrower here, and the Regulation does not say what.
Is a manager’s cheque cash? An exchange-house transfer? Old gold traded in against new stock? The Ministry of Economy and Tourism’s 2026 AML guidance for dealers takes its own view on some of these, for AML purposes (covered in our gold outlook of 25 September). Nothing yet says VAT will borrow it.
For a trade where settlement is often not a bank transfer, the definition matters more than the number, and it is the gap to watch for when the Ministerial Decision is published.
One Cash Purchase, Three Rulebooks
For a dealer in precious metals, the AED 60,000 cash purchase above now sits under three sets of rules at once, and they count differently.
| AML (Cabinet Resolution No. 134 of 2025) | Supplier verification (FTA Decision No. 13 of 2026) | Cash rule (Executive Regulation Art. 54(3)) |
| What triggers it A single cash transaction, or linked transactions, of AED 55,000 or more (Article 3(3)) | Deducting input tax. Payment method is one of the things to check | A cash-paid supply above an amount not yet set |
| Linked or split payments Aggregated (“appear to be linked”) | Not stated in the sources we could read | Not yet addressed; left to the “controls” |
| Consequence AML obligations for that transaction | Failure feeds Article 54 bis: the FTA may reject the deduction | Input tax on the supply not recoverable |
| Status on 1 October In force | In force, per PwC’s summary | In force, but no amount |
The AML line is in the law (Cabinet Resolution No. 134 of 2025, Article 3(3)). The middle column rests on PwC’s published summary of Decision 13, which lists “cash payments” among payment arrangements “requiring justification” before input tax is deducted (PwC Middle East, 26 Aug 2026). We have not been able to read the Decision’s own text; the FTA’s PDF returns an empty file.
That middle column is the mechanism behind the point made earlier. Article 54 bis of the Decree-Law lets the FTA reject a deduction where the buyer “should have known” a supply was connected to evasion, and deems it to have known where it “failed to verify the validity and integrity of the supplies” in the way the FTA prescribes. An unexplained cash payment is exactly the kind of gap that clause is written for. We covered Decision 13 here.
A control set at AED 55,000 because of AML is not the VAT control. It may be above the VAT line or below it. Nobody knows yet.
The Reverse-Charge Problem for Gold and Scrap
Trade in scrap, and in gold and precious metals, between registrants can already fall under the domestic reverse charge. From 14 January 2026 it applies to scrap metal between registrants under Cabinet Decision No. 153 of 2025, and the Ministry of Finance describes it as the same mechanism already used for “electronic devices, gold, and other precious metals” (MoF, 19 Dec 2025).
Under the reverse charge the buyer accounts for the VAT. For a fully taxable buyer the reverse charge is normally neutral, because the VAT it accounts for is recoverable as input tax under the usual rules. Article 54(3) says “any supply”, and nothing in the clause carves out reverse-charged supplies. If a reverse-charged scrap or gold purchase above the line is paid in cash, the buyer would owe the VAT and could not recover it. The Ministerial Decision’s controls may change that. As written, they have not.
The broader sector picture, including why bullion traders already sit in a credit position, is in our VAT credit piece.
What to Do Before the Number Arrives
You cannot set a threshold control without a threshold. You can make sure that on the day it is published, you can see your exposure in an afternoon instead of reconstructing it over a quarter.
- Add a payment-method field to every purchase invoice, from 1 October: bank transfer, card, cheque, manager’s cheque, exchange house, cash, trade-in, mixed.
- Record the intended method when you book the invoice, not only when you pay it. Clause 3 asks about intention.
- Record the value before VAT alongside the gross. That is probably the figure the test uses.
- Flag reverse-charge purchases so you can see the cost if recovery is denied on them.
- List every supplier you pay in notes, with twelve months of spend. That is also the list Decision 13 expects you to be able to justify.
- Do not split invoices to manage the line. The AML rules already aggregate linked transactions, and the VAT controls are expressly reserved to the Ministerial Decision.
- Watch the MoF legislation page. When the decision lands, re-run the list against it.
If you want the ledger changes set up properly, our VAT team works with gold and commodity businesses on exactly this.
Law stated as at 29 September 2026. This is general information, not advice on your specific facts. English texts are translations; the Arabic prevails.
Frequently Asked Questions
Can I recover input VAT if I pay a supplier in cash in the UAE?
From 1 October 2026, not on a supply whose value exceeds an amount the Minister of Finance will set, where the consideration is paid or intended to be paid in cash (VAT Executive Regulation, Article 54(3), added by Cabinet Decision No. 149 of 2026). Until the amount is issued, the rule has no line to apply.
What is the cash payment threshold for UAE VAT?
As at 29 September 2026, none has been issued. It will be set by a Ministerial Decision, together with “controls” on how the rule applies.
Does the rule apply from 1 October 2026?
Yes. Cabinet Decision No. 149 of 2026 takes effect on 1 October 2026, and the cash rule is not among the provisions deferred to 2027.
Is a cheque or an exchange-house transfer “cash”?
The Decision does not define cash. Expect the Ministerial Decision to deal with it. Until then, record the method used for every payment so you can classify it when the definition arrives.
