27/08/2026
UAE VAT ALERT:
FTA INTRODUCES NEW VERIFICATION REQUIREMENTS BEFORE INPUT VAT DEDUCTION
The UAE Federal Tax Authority has issued FTA Decision No. 13 of 2026, introducing specific measures, procedures and conditions that taxable persons must follow when verifying the validity and integrity of supplies before deducting input tax.
The Decision was issued on 22 July 2026 and will come into effect from 1 October 2026.
This is an important compliance development for UAE VAT-registered businesses because input VAT deduction will increasingly require businesses to demonstrate that they have exercised appropriate due diligence over their suppliers and transactions.
What will businesses need to verify?
1. Supplier identity
Businesses must verify the identity of their suppliers.
For individual suppliers, this includes obtaining valid identification and meeting the supplier either physically or virtually before the supply.
For legal entities, businesses must verify incorporation through official databases or appropriate corporate documents and verify the identity of the authorised representative.
2. Supplier's business premises
Taxable persons must verify that the supplier has an actual place of business and that the premises are compatible with the nature of the supplier's activities.
This may be done through appropriate electronic means or a field visit.
3. Supplier risk assessment
Businesses must consider specified risk indicators, including:
• More than two address changes by the supplier during the preceding 12 months;
• More than two changes in key employees during the preceding 12 months; and
• Transactions that appear disproportionate or unexpected considering the supplier's size, value, volume or business history.
Where such indicators exist, the taxable person should retain a clear and justified explanation.
4. Higher-value supplier relationships
Where supplies from a supplier exceed, or are expected to exceed, AED 375,000 over the relevant 12-month period, additional checks apply, including verification that the supplier maintains a bank account and review of relevant publicly available reviews and media coverage.
5. Verification of the actual supply
Businesses must also assess the transaction itself.
This includes considering whether:
• The transaction has genuine commercial reasons;
• The payment arrangements are commercially justifiable;
• Payments are made electronically, subject to the specific rules for cash payments;
• Prices or profit margins are not commercially unjustifiable or significantly outside market conditions without a clear reason;
• The goods or services fall within the supplier's ordinary or licensed activities;
• Goods are authentic and their origin and ownership/right of disposal can be established; and
• Any intermediary's role in the transaction has a clear and justifiable commercial explanation.
Documentation will be critical
The Decision does not stop at performing the checks.
Taxable persons must document the verification steps, retain supporting records and maintain a documented internal policy identifying the persons responsible for implementing, reviewing and supervising the verification procedures.
What about smaller transactions?
A taxable person may generally disregard these verification measures where the consideration for an individual taxable supply, excluding VAT, is less than AED 10,000.
However, this exception does not apply where the total value of supplies received from the same supplier exceeds, or is expected to exceed, AED 100,000 over the relevant 12-month period.
Effective from 1 October 2026
Businesses should therefore use the period before implementation to review their current supplier onboarding, procurement, payment, VAT documentation and internal control procedures.
The practical message is simple:
Don't just keep the VAT invoice. Keep evidence that you reasonably verified the transaction behind it.
Businesses should consider developing a documented supplier due-diligence process that is proportionate to their transactions and risk profile before the new requirements take effect.
Arif & Associates
Advocates & Chartered Accountants
UAE Tax | VAT | Corporate Tax | Tax Advisory | Compliance
