From 1 October you have to check your supplier before you recover the input VAT

From 1 October 2026, UAE VAT-registered businesses must carry out defined supplier and supply verification before deducting input tax. The rules sit in FTA Decision No. 13 of 2026, issued for the purposes of Article 54 bis of the VAT law, which lets the Authority reject input tax where a supply formed part of a chain connected to tax evasion and the taxable person knew, or should have known, about it. Holding a valid tax invoice does not demonstrate that the verification has been done.

Of everything changing this autumn — and Cabinet Decision 149 changes a lot — this is the one that will take finance and procurement teams longest to absorb. It is not a reporting change. It is a change to what you have to do before you buy.

What Article 54 bis actually allows

The Authority can refuse recoverable input tax where it establishes two things: the supply formed part of a supply or supply chain related to tax evasion, and you knew or should have known of that connection.

The sting is in the second limb. You are treated as having been required to know where the validity and integrity of the supply were not verified before the input tax was deducted. So the failure to check is not a separate administrative breach. It is the mechanism by which you are deemed to have known.

And the chain is not just your supplier. VATP046 confirms the relevant supply chain is not limited to direct suppliers and customers, and may include any person involved in the wider chain. You can be three parties away from the fraud.

One more thing worth being clear about: following the procedures does not guarantee recovery, and it does not replace the existing conditions for deducting input tax. It removes the specific deeming provision. Everything else still applies.

The three thresholds that decide how much work you do

Read the first two rows together, because that is where the trap is. Finance teams will naturally set a rule like “skip verification under AED 10,000” and apply it per invoice. That is wrong. The exception disappears once your annual spend with that supplier passes AED 100,000 — which for a regular monthly supplier is under AED 8,500 a month. Most of your recurring small suppliers will be inside the net, not outside it.

Note also that the tests are forward-looking: supplies that are expected to exceed the thresholds count. A supplier you have just engaged on a contract worth AED 400,000 is over the line from the first invoice, not from the month you cross it.

Verifying the supplier

Verification happens before the first supply, and must be repeated where the supplier has not been verified in the previous twelve months.

If the supplier is an individual, obtain valid proof of identity — Emirates ID or passport — and meet them, in person or virtually, before the supply is made.

If the supplier is a company, verify incorporation through official databases or obtain a copy of the certificate of incorporation, confirm the details are valid and consistent with the rest of what you hold, then verify the identity of the director, agent or employee authorised to represent them and obtain proof of identity for that person.

Address and place of business

You must also confirm the supplier has an actual place of business, through appropriate electronic means or a field visit, and that the location is compatible with what they claim to do. A trading company whose registered address is a mailbox, or a manufacturer with no premises, is precisely what this is aimed at.

The three risk indicators

Decision No. 13 names three. Where one applies, you must retain a clear and justified explanation and give it to the FTA if asked, and the explanation has to be consistent with the evidence you actually hold.

• The supplier changed its address more than twice in the previous twelve months.
• The supplier changed key employees — managers, or the people dealing with you — more than twice in the previous twelve months.
• The supplier undertook transactions that are disproportionate or unexpected in volume, value or nature compared with the size and history of its business.

The third is the one that requires judgement rather than a database lookup. A small supplier suddenly invoicing you for far more than their apparent capacity is the classic missing trader pattern, and it is the fact pattern this whole regime exists to catch.

What you must check on every supply

Supplier onboarding does not discharge the obligation. Each taxable supply is checked in its own right before the input tax is deducted. The matters to verify include:

• A genuine commercial reason for the transaction, and for this supplier’s involvement in it.
• The payment method and conditions, including that consideration is paid electronically.
• Where cash is used: a documented commercial reason, a payment within the applicable legislative thresholds, and a payment that can be readily verified. This connects directly to the new cash payment restriction.
• Where a third party pays, or payment goes to an account outside the supplier’s country of incorporation, a reasonable commercial explanation.
• Whether the price or margin is commercially justifiable and not significantly out of line with the market without a clear reason.
• Whether the goods or services are consistent with the supplier’s licensed activities.
• For goods, their authenticity and origin, and whether the supplier owns them or has the right to dispose of them.
• Where an intermediary is involved, whether its role has a clear commercial justification.

Read that list again as a procurement checklist rather than a tax one. Most of it is not tax work at all — it is buying diligence that happens to have been made a condition of VAT recovery. Which is why it cannot live only in the tax function.

The documented policy — the part most will miss

The Decision requires you to document the verification performed and keep the supporting records. It also requires a documented policy identifying who is responsible for implementing, reviewing and supervising the procedures, with their powers and responsibilities set out.

That is a named-owner requirement, not a folder of PDFs. In a review, a business that can produce a policy, a named reviewer and a sample of completed checks is in a completely different position from one that can produce invoices and an assurance that someone probably looked.

Keep it with your other tax records, for the statutory period, and make sure the evidence is retrievable by supplier and by transaction — not buried in an email chain belonging to someone who has since left.

What this looks like in practice

The evidence supporting an input tax deduction will now sit across procurement, accounts payable and tax. Three things usually have to change:

1. Supplier onboarding becomes a gate, not a form. No verification, no first purchase order. The check has to happen before the supply, and retrofitting it afterwards does not satisfy the Decision.
2. Someone has to monitor the AED 100,000 and AED 375,000 lines per supplier, rolling. This is a report, and most accounting systems will not produce it without being asked. Build it in September, not in January.
3. Payment terms become a tax issue. Electronic payment is the expected norm. Cash, third-party payments and payments to accounts outside the supplier’s country of incorporation all now need a written commercial explanation attached to the transaction.

If your VAT and corporate tax figures already disagree, or you have had a query before, tighten this first. Verification failures and reconciliation gaps compound — see what actually triggers an FTA tax audit.

What it does not do

It does not make you the guarantor of your supply chain. The FTA still has to establish a connection to tax evasion before Article 54 bis is in play at all. What the Decision does is remove the defence of not having looked.

It also does not replace the ordinary conditions for recovery. You still need a valid tax invoice, the supply still has to be used for taxable purposes, and blocked input tax stays blocked. This is a layer on top, not a substitute.

And it does not guarantee recovery. Doing everything in the Decision does not entitle you to the deduction if the underlying conditions fail. It protects you from a specific line of attack, which is worth a great deal, but it is not a safe harbour in the general sense.

Frequently asked questions