UAE VAT Supplier Verification Rules 2026 — New FTA Requirements

From 1 October 2026, UAE businesses will face new supplier and transaction verification requirements before deducting input VAT.

The Federal Tax Authority (FTA) has issued Decision No. 13 of 2026, introducing specific measures that taxable businesses must follow to verify the validity and integrity of supplies. The Decision implements the requirements under Article 54 bis of the UAE VAT Law and strengthens the FTA’s ability to deny input VAT recovery where a supply is connected to tax evasion and the taxable person knew, or should have known, about that connection.

The change means that holding a valid tax invoice alone may no longer be sufficient. Businesses need appropriate supplier due diligence, transaction-level checks and documented evidence supporting their VAT position.

The UAE introduced Article 54 bis as part of amendments to the VAT Law effective from 1 January 2026. The provision allows the FTA to deny input tax deductions where it determines that a supply forms part of a tax-evasion arrangement.

Taxable persons are therefore expected to take reasonable measures to establish that the supplies on which they claim input VAT are legitimate. FTA Decision No. 13 of 2026 now sets out the verification framework businesses are expected to follow.

This effectively introduces a much greater Know Your Supplier responsibility into day-to-day VAT compliance.

1. Supplier Verification

Businesses must conduct appropriate checks when dealing with suppliers, including verifying their identity or legal existence and actual place of business.

For corporate suppliers, this may involve reviewing incorporation information and identifying the authorised representative. Businesses should also consider potential risk indicators, such as unusual transaction volumes or frequent changes in addresses or key personnel.

These checks should be conducted when first dealing with a supplier and repeated at least every 12 months.

2. The Supply Itself Must Be Verified

Due diligence does not stop with verifying who the supplier is.

Businesses must also consider whether the transaction itself appears legitimate. Relevant factors include the commercial rationale of the transaction, pricing, payment method, supplier’s licensed activities and authenticity or ownership of the goods, where applicable.

This represents an important shift from invoice-based VAT compliance towards a broader assessment of the underlying commercial transaction.

3. Special Rules for Supplies Below AED 10,000

Individual supplies valued below AED 10,000 excluding VAT may generally be exempt from the verification requirements.

However, businesses need to monitor their total dealings with each supplier. The exemption ceases to apply once the cumulative value of supplies from the same supplier exceeds, or is expected to exceed, AED 100,000 within a rolling 12-month period.

This means companies cannot simply treat every small invoice as automatically exempt.

4. Enhanced Checks for Suppliers Above AED 375,000

Additional due diligence is required where supplies from one supplier exceed, or are expected to exceed, AED 375,000 during a rolling 12-month period.

This includes obtaining appropriate confirmation of the supplier’s UAE bank account and reviewing publicly available reputation or media information for potential risk indicators.

5. Businesses Must Keep Evidence

Performing the checks is only part of the requirement. Businesses should retain evidence demonstrating the verification procedures undertaken and establish a documented internal policy identifying the people responsible for implementing, reviewing and supervising supplier verification.

Businesses should not wait for their next VAT return to address the changes. Existing procurement, accounts payable and VAT procedures should be reviewed before the new requirements take effect.

In practical terms, businesses should:

• Review and update supplier onboarding procedures;
• Identify suppliers exceeding the AED 100,000 and AED 375,000 thresholds;
• Introduce periodic supplier verification and annual reviews;
• Establish procedures for checking the commercial substance of transactions;
• Maintain supporting records for all verification performed; and
• Create a formal internal supplier-verification policy with clearly assigned responsibilities.

The objective is not simply to collect additional documents. Businesses need to be able to demonstrate that reasonable due diligence was performed before input VAT was deducted.

The new requirements add another layer of responsibility to VAT compliance in the UAE. Businesses with multiple suppliers, high transaction volumes or significant input VAT claims may need to review their existing accounting and procurement procedures particularly carefully.

At My Business Consulting, our experienced accounting and tax specialists support UAE businesses with VAT registration, VAT return filing, VAT compliance reviews, accounting and bookkeeping, transaction reviews and ongoing tax compliance support.

We can help you review your current VAT procedures, identify potential compliance gaps and prepare your business for the new requirements taking effect from 1 October 2026.

Make sure your VAT processes are ready before the new rules take effect.

Speak to My Business Consulting about VAT support