Did you know that having a valid tax invoice may no longer be sufficient to protect your input VAT claim?
The UAE Federal Tax Authority (FTA) has introduced Decision No. 13 of 2026, establishing new requirements for businesses to verify their suppliers and transactions before recovering input VAT.
Effective from 1 October 2026, the Decision makes supplier due diligence an important part of VAT compliance.
What Has Changed?
Previously, businesses commonly focused on obtaining valid tax invoices, confirming that expenses were business-related, and maintaining supporting records.
Under the new Decision, businesses must also perform prescribed checks to establish the validity and integrity of suppliers and transactions.
These measures are particularly important where a supply may be connected to tax evasion.
The FTA can reject input VAT recovery where a business knew, or should reasonably have known, that a supply was connected to tax evasion, subject to the applicable legal conditions.
What Must Businesses Verify?
Depending on the supplier and transaction, verification measures may include:
Supplier legitimacy: Confirming incorporation, authorised representatives and business premises.
Transaction purpose: Ensuring purchases have a genuine commercial rationale.
Payment arrangements: Reviewing unusual payments, including payments to unrelated third parties.
Business activities: Checking whether the goods or services are consistent with the supplier's operations.
Supporting evidence: Maintaining appropriate documentation of verification procedures.
These checks should form part of supplier onboarding and ongoing VAT compliance.
Three Important Thresholds
The Decision introduces thresholds that businesses should monitor.
| Threshold | Requirement |
|---|---|
| Below AED 10,000 | Certain individual supplies may qualify for a conditional verification exception. |
| Above AED 100,000 | The small-value exception becomes unavailable where cumulative supplies from the same supplier exceed, or are expected to exceed, this amount over 12 months. |
| Above AED 375,000 | Additional supplier verification measures apply, including specified bank-account verification. |
Important: Even smaller invoices may require verification when cumulative purchases from the same supplier exceed the relevant threshold.
A Practical Example
Suppose your company purchases goods worth AED 100,000 plus AED 5,000 VAT.
You receive a valid tax invoice and record AED 5,000 as recoverable input VAT.
However, the supplier requests payment to an unrelated third party, and its business activities appear inconsistent with the goods supplied.
If these warning signs are ignored and the transaction is connected to tax evasion, your input VAT recovery could be challenged under the applicable rules.
A valid invoice alone does not eliminate the need for appropriate supplier verification.
What Should UAE Businesses Do Now?
Businesses should review their supplier onboarding and purchasing procedures to ensure that appropriate checks are performed and documented.
In particular, they should:
Verify supplier identities and business details.
Monitor supplier spending against the applicable thresholds.
Investigate unusual transactions and payment arrangements.
Maintain supporting records and verification evidence.
Review relevant compliance issues before submitting VAT returns.
These procedures should be integrated into everyday accounting operations rather than performed only when a VAT return becomes due.
Final Thoughts
FTA Decision No. 13 of 2026 reinforces an important principle: VAT compliance goes beyond collecting invoices and recording transactions.
Businesses must be able to demonstrate appropriate care when dealing with suppliers and claiming input VAT.
Establishing proper verification procedures now can help reduce the risk of future VAT disputes and avoidable compliance issues.
How Finzoryx Can Help
At Finzoryx Consulting LLC, we help UAE businesses maintain accurate accounting records, review VAT compliance and strengthen financial controls.
If your business needs assistance reviewing supplier records, improving verification procedures or managing VAT compliance, our team is here to help.
Disclaimer: This article provides general information and does not constitute tax or legal advice. The application of VAT rules depends on the facts and circumstances of each transaction.