The Federal Tax Authority (FTA) has issued new rules requiring businesses to verify their suppliers and the supplies they receive, or risk losing the right to recover input VAT on transactions connected to tax evasion.
FTA Decision No. 13 of 2026 sets out the due diligence measures businesses must follow under Article 54 bis of the VAT Law, a provision inserted by Federal Decree-Law No. 16 of 2025. The decision will take effect on October 1, 2026, giving businesses a narrow window to prepare.
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Thomas Vanhee, partner, Aurifer Middle East Audit and Tax, said Article 54 bis allows the FTA to deny a taxable person’s input tax recovery where a supply formed part of a chain of supplies connected to tax evasion.
“If the recipient actually knew of the connection, rejection of the claim is mandatory. If the recipient should have known, based on the circumstances of the supply, rejection is discretionary.”
The key clause is the third one, he said, which deems a taxable person to have been required to be aware if they failed to verify the validity and integrity of the supplies they received, in line with measures prescribed by the Authority.
Decision No. 13 of 2026 sets out exactly what those measures are.
The UAE implemented five per cent VAT from January 2018 as part of a framework agreed by the Gulf Cooperation Council (GCC) countries.
Two levels of checks
The decision imposes obligations at two levels – supplier verification and supply verification, he said.
“Supplier verification must be carried out the first time a business deals with a supplier, and repeated if twelve months have passed. It requires identity documentation to be checked against official databases, verification of the individual authorised to represent the supplier, and confirmation that the supplier has an actual place of business consistent with its claimed activity,” added Vanhee.
As per the new rules, businesses must also assess three prescribed risk indicators – changes of address, changes of key personnel, and transactions disproportionate to the size and history of the business.
Where annual supplies from a given supplier exceed Dh375,000, businesses must additionally obtain unqualified written confirmation from a bank authorised in the UAE that the supplier holds an account there, and review public reviews and media coverage of the supplier.
Supply verification is the more demanding of the two, as it applies to every individual supply received. Businesses must confirm that the supplier’s participation in the transaction rests on genuine commercial reasons, that pricing and margins are not commercially unjustifiable, that the goods or services fall within the supplier’s licensed activities, and that title and origin of the goods are sound. Where an intermediary is involved, its role must also be commercially explicable. Payment must be made electronically, with any cash payment requiring a documented commercial reason.
Article 5 of the decision further requires businesses to maintain a written policy setting out who performs, reviews and supervises these checks.
Exemption
The decision does provide a de minimis exemption under Article 6, for supplies below Dh10,000 – excluding VAT. However, this exemption is disapplied entirely once total supplies from a given supplier exceed Dh100,000 over the preceding twelve months, or are expected to exceed that threshold over the following twelve months, added Thomas Vanhee.
That works out to approximately Dh8,300 a month – a level most recurring supplier relationships are likely to cross without any particular red flag, meaning the exemption will offer limited relief in practice, he noted.
Vanhee pointed out with just over a month remaining before the rules take effect, businesses across the UAE will need to move quickly to put verification policies and documentation processes in place.
Source: Khaleej Times