UAE tightens VAT rules, Indian businesses face tougher compliance checks
What Happened
The UAE has introduced VAT changes that strengthen requirements around input-tax recovery, supplier verification, employee expenses and certain cash-paid transactions. Most amendments under Cabinet Decision No. 149 of 2026 took effect from October 1, 2026. Businesses must also pay closer attention to the validity and integrity of supplies before claiming input VAT. Separately, revised VAT rules include changes covering composite supplies, the Capital Assets Scheme and employee expenses. The standard UAE VAT rate remains 5%, and the mandatory registration threshold remains AED 375,000.
Key Takeaways
For Indian companies operating or transacting in the UAE, the changes mean more rigorous documentation and supplier due diligence, particularly when claiming input VAT. However, describing the changes simply as increasing costs can be misleading because some amendments also simplify compliance, including the removal of reverse-charge self-invoicing requirements introduced from January 2026.