New UAE VAT rules require businesses to verify suppliers and transactions before recovering input VAT, with enhanced checks for higher-value relationships.
DUBAI: New UAE VAT rules took effect on October 1, 2026, introducing formal supplier and transaction verification requirements for taxable businesses seeking to recover input VAT.
Federal Tax Authority Decision No. 13 of 2026 implements Article 54(bis) of the VAT Law and sets out the checks businesses must perform to demonstrate the validity and integrity of supplies before deducting input tax.
Why businesses need to check their suppliers
The rules are particularly important where a transaction forms part of a supply chain connected to tax evasion. Article 54(bis) allows input tax recovery to be denied where a taxable person knew, or should reasonably have known, about that connection. Decision No. 13 provides the verification framework businesses can use to demonstrate proper due diligence.
Businesses must verify a supplier when dealing with it for the first time. For existing suppliers, verification must be repeated when the supplier has not been checked during the preceding 12 months.
Checks include confirming the supplier’s identity or legal incorporation, actual place of business and authorised representative where relevant. Businesses must also consider risk indicators connected to the supplier and its activities.
AED 375,000 triggers enhanced verification
Under the UAE VAT rules, enhanced checks apply where supplies received from one supplier exceed, or are expected to exceed, AED 375,000 over the relevant 12-month period.
At this level, businesses must carry out additional verification, including confirming the supplier’s bank account and reviewing prescribed publicly available information relating to the supplier. Professional tax guidance describes this as enhanced supplier due diligence rather than the separate AED 375,000 threshold used for mandatory VAT registration.
What happens to purchases below AED 10,000?
There is an exception for lower-value transactions. Verification requirements may be disregarded for an individual taxable supply worth less than AED 10,000, excluding VAT, provided the conditions in the decision are met.
However, that exception stops applying where total supplies received from the same supplier exceed, or are expected to exceed, AED 100,000 during the relevant 12-month period.
Transactions themselves also need verification
The requirements go beyond checking who the supplier is. Businesses must assess whether transactions have a genuine commercial rationale, whether pricing is reasonable, whether payment arrangements make commercial sense and whether the goods or services fall within the supplier’s licensed and ordinary activities. Records supporting these checks should also be maintained.
The new UAE VAT rules therefore place greater emphasis on procurement, finance and accounts-payable controls before input VAT is claimed.
Impact to expect
UAE businesses may need to update vendor onboarding, supplier databases and VAT review procedures. Companies with large supplier networks could face additional compliance work, while properly documented checks should provide stronger evidence that reasonable due diligence was completed if the FTA later questions an input VAT claim.
