Paid a Supplier in Cash? Check the Input VAT First

• 01 October, 2026
• By the Exiloz tax team
• Tax Compliance

Last reviewed 1 October 2026 by the Exiloz tax team against the UAE legislation in force on that date. Tax law moves — confirm any figure against tax.gov.ae before you act on it.

Cash can make the VAT your cost

From 1 October 2026, a valid tax invoice and a cash receipt may not be enough to recover input VAT in the UAE. Cabinet Decision No. 149 of 2026 blocks recovery on cash-paid supplies above a threshold the Minister of Finance will set. That threshold was still unpublished on 26 September 2026. A VAT health check can find cash purchases at risk.

The risk sits with the buyer, not the supplier. A supplier can charge VAT correctly and still leave the buyer unable to deduct it because of how the invoice was paid. That turns recoverable VAT into a direct cost. This guide explains the rule, what is still unknown and the controls to add before the next cash payment.

What changes for cash-paid supplier invoices on 1 October 2026?

Cabinet Decision No. 149 of 2026 adds Clause 3 to Article 54 of the UAE VAT Executive Regulation. Input tax cannot be recovered on a supply above a Ministerial amount paid, or intended to be paid, in cash. The change takes legal effect on 1 October 2026.

The rule changes the buyer's recovery, not the supplier's sale, which stays taxable. It also covers cash that is only intended, so the decision point is the purchase order. A business can pay the full invoice and still lose the VAT inside it.

Quick Answer

From 1 October 2026, UAE input VAT on a cash-paid supply above a Ministerial threshold cannot be recovered. The supplier's sale stays taxable, so the VAT becomes the buyer's cost.

What is the cash payment threshold for input VAT?

That amount has not been set yet. The UAE Ministry of Finance says a separate Ministerial Decision will prescribe the amount and the controls that apply. No official source checked on 26 September 2026 gave a figure.

Do not borrow a number from a bank policy, a petty-cash manual or another country's VAT rules. The AED 10,000 figure in FTA Decision No. 13 of 2026 belongs to a different test and does not fill this gap. Until the decision is published, treat any material cash purchase as a VAT risk.

Quick Answer

The UAE cash payment threshold for input VAT had not been published by 26 September 2026. A Ministerial Decision will set it, so no figure should be assumed or copied.

Does a valid tax invoice still protect the input VAT?

No, not when the cash rule applies. The invoice still supports the supplier's VAT charge, but the buyer's deduction now also depends on how the invoice was paid. Payment evidence has become part of the tax answer for every purchase.

Take an illustrative equipment purchase of AED 210,000 before VAT, with AED 10,500 of VAT at 5%. If the buyer pays the AED 220,500 in cash and the future threshold is lower, the AED 10,500 deduction is lost. A cash discount must beat that lost VAT before cash is cheaper.

Quick Answer

A valid UAE tax invoice no longer guarantees input VAT recovery on a cash-paid supply above the Ministerial threshold. The buyer must also show how the supplier was actually paid.

How does FTA Decision No. 13 of 2026 treat cash payments?

Article 4(2) treats electronic payment as the normal default. FTA Decision No. 13 of 2026, also effective on 1 October 2026, says cash needs a documented commercial reason and must be easily verifiable. It must also stay within the thresholds in the applicable tax legislation.

The decision's other figures govern separate supplier checks. Supplies under AED 10,000 can skip verification unless the supplier's 12-month total exceeds AED 100,000, and suppliers above AED 375,000 need a bank-account confirmation. Our guide to the new input tax checks covers each of those tests.

Quick Answer

FTA Decision No. 13 of 2026 expects UAE suppliers to be paid electronically. Any cash payment needs a written commercial reason and supporting evidence that the FTA can easily verify.

What should businesses change before paying suppliers in cash?

Move the decision into procurement, before any order. Add a payment-method field to purchase approvals and require finance sign-off before any material cash payment. Then list every open order that is still due to be paid in cash after 1 October 2026.

Splitting one supply into smaller cash payments is unsafe, because the rule looks at the value of the supply, not each instalment. How a part-cash, part-transfer payment is treated is still unsettled, so hold those deductions for review. Our VAT return filing checklist shows where that review fits.

Quick Answer

UAE businesses should approve the payment method before buying, not after. Splitting a cash-paid supply into instalments is unsafe, and mixed payments remain unsettled until the Ministerial Decision is published.

Frequently Asked Questions

Main Takeaways

From 1 October 2026, UAE input VAT on cash-paid supplies above a Ministerial threshold cannot be recovered. The threshold was still unpublished on 26 September 2026. FTA Decision No. 13 of 2026 expects electronic payment and a documented reason for any cash. Decide the payment method at purchase approval, because any lost VAT becomes a direct cost to the buyer.

Treat Cash as a VAT Decision

The cash rule changes who carries the risk in a supplier payment. The supplier's VAT position stays the same, while the buyer can lose a deduction it used to take for granted. The threshold is still missing, but the rule is already law from 1 October 2026. Waiting for the number leaves every material cash purchase exposed in the meantime.

Start with a list of suppliers you still pay in cash, and move material payments to bank transfer or card. Write down the reason for any cash payment that cannot be avoided. Then check the Ministry of Finance for the Ministerial Decision before each VAT return. Exiloz can test recent purchases and tighten the approval chain before the next filing.

Sources & References