Federal Tax Authority Decision No. 13 of 2026, effective from 1 October 2026, sets out the checks that taxable persons must carry out on suppliers and supplies before deducting input tax for the purposes of Article 54(bis) of the UAE VAT Law.
Article 54(bis) deals with supplies connected with tax evasion. Decision No. 13 adds a prescribed verification process aimed at identifying concerns relating to both the supplier and the transaction before input tax is claimed.
For businesses, this means that holding the usual VAT documentation is not enough on its own. The prescribed checks must also be carried out and properly documented.
Scope and Purpose of the Verification Regime
Article 54(bis) addresses input tax deductions involving a supply, or chain of supplies, connected with tax evasion.
Where it is established that the relevant supply was connected with tax evasion and the taxable person knew of that connection when deducting input tax, the FTA must reject the deduction. Where the taxable person should have known of the connection, the FTA may reject the deduction.
Decision No. 13 is particularly important to the second of these tests.
If the prescribed verification is not carried out, the taxable person is treated as having been required to know that the supply was connected with tax evasion. This does not mean that a failed check automatically makes the input VAT irrecoverable. The FTA must still establish that the relevant supply formed part of a supply, or chain of supplies, connected with tax evasion.
The Decision therefore requires businesses to check both the supplier and the transaction, record the steps taken and retain the supporting evidence.
This does not mean that suppliers or transactions are presumed to be fraudulent. It means that businesses need to be able to show what checks were carried out and how any unusual circumstances were considered.
Supplier Due Diligence Under Article 3
Article 3 sets out the checks to be carried out on the supplier. The requirements differ depending on whether the supplier is an individual or a legal entity.
Identity and Corporate Verification
For an individual supplier, the business must obtain a copy of valid proof of identity, such as an Emirates ID or passport. The supplier must also be met, either in person or virtually, before the supply is made.
Where the supplier is a legal entity, its incorporation must be verified through official databases or by obtaining a copy of its certificate of incorporation. The information must be valid and consistent with the entity’s name, address, employees and other related information.
The business must also obtain a copy of valid proof of identity for the director, agent or employee authorised to represent the supplier.
Business Presence and Risk Indicators
The supplier must have an actual place of business. This can be checked using appropriate electronic means or through a physical visit. The premises should also be consistent with the nature of the supplier’s activities.
Article 3 identifies three specific risk indicators.
The first is where the supplier has changed its address more than twice during the previous 12 months.
The second is where the supplier has changed key employees more than twice during the previous 12 months. This includes managers and the persons with whom the business deals.
The third is where the supplier has carried out transactions that are disproportionate or unexpected in volume, value or nature when compared with the size and history of its business.
If one of these indicators is present, the business must retain a clear and justified explanation and provide it to the FTA if requested. The indicator must also be consistent with the information and evidence available to the business.
Additional Checks Above AED 375,000
Additional checks apply where the value of supplies received from a supplier exceeds AED 375,000 during the previous 12 months, or is expected to exceed AED 375,000 during the next 12 months.
Where this threshold is exceeded, the business must verify that the supplier has a bank account and review recommendations from the supplier’s clients, where available.
Written confirmation must also be obtained from a UAE authorised bank confirming that the supplier has an account. The confirmation must not contain any relevant reservations or conditions. It does not need to be addressed specifically to the recipient of the supply.
The business must also review and assess publicly available reviews and media coverage relating to the supplier from reliable sources. That information should be consistent with the nature and size of the supplier’s business and should not indicate suspected tax evasion.
Transaction Level Verification Under Article 4
Checking the supplier is only part of the process. The transaction itself must also be examined.
The business must assess the circumstances of the supply and ensure that the supplier’s involvement has a genuine commercial basis.
Payment arrangements must also be commercially justifiable. If a third party is involved in making or receiving payment, or payment is made to an account outside the supplier’s country of incorporation, there must be a reasonable commercial explanation. That explanation must be consistent with the information and evidence available to the business.
The Decision requires payment to be made electronically unless a cash payment meets the stated conditions. Where cash is used, there must be a documented commercial reason, the payment must fall within any applicable tax thresholds and it must be easy to verify.
There is a separate restriction under Cabinet Decision No. 149 of 2026. It provides that input tax may not be recovered where the value of a supply exceeds an amount to be specified by the Minister of Finance and the consideration is paid, or intended to be paid, in cash. The Ministerial Decision will also prescribe the relevant controls. At the time of writing, the relevant amount and controls have not yet been published.
Businesses must also consider the commercial terms of the transaction. Prices or profit margins should not be commercially unjustifiable or significantly different from market conditions without a clear reason.
The goods or services should fall within the supplier’s ordinary activities or the activities it is licensed to carry out. Where goods are involved, their authenticity and origin must also be checked, together with the supplier’s ownership of the goods or its right to dispose of them.
If the supplier is acting as an intermediary, there must be a clear and commercially justifiable explanation for its role.
Ongoing Verification and Internal Procedures
Supplier verification is required when dealing with a supplier for the first time. Where there are recurrent dealings, the supplier must also be verified if it has not been checked during the previous 12 months.
This is not a separate requirement to review every supplier automatically once a year. The requirement arises when there are further dealings with a supplier that has not been verified during the preceding 12 months.
Subject to the de minimis exception below, each taxable supply received or accepted must also be assessed against the transaction level requirements.
The verification steps must be documented and the supporting documents and evidence retained so that the FTA can assess how the procedures were carried out.
Businesses must also maintain a documented internal policy identifying the persons responsible for implementing, reviewing and supervising the verification procedures. Their respective powers and responsibilities must be clearly set out. The policy must also be retained with the relevant records.
The De Minimis Exception
Article 6 provides an exception for smaller transactions.
The supplier and transaction verification requirements may be disregarded where the consideration for a taxable supply, excluding VAT, is less than AED 10,000.
That exception does not apply where the total value of supplies received from the same supplier exceeds AED 100,000 during the previous 12 months, or is expected to exceed AED 100,000 during the next 12 months.
The AED 100,000 test therefore applies at supplier level. A business cannot look only at the value of an individual transaction when deciding whether the exception is available.
Practical Implications for Businesses
Businesses should prepare for the new requirements before 1 October 2026.
The first step is to put the required verification policy in place and clearly allocate responsibility for carrying out, reviewing and supervising the checks.
Supplier thresholds will also need to be monitored. Accounting, procurement or ERP systems should be capable of identifying when the AED 100,000 limit on the de minimis exception or the AED 375,000 additional supplier checks become relevant.
Supplier onboarding processes should be updated to collect the identification, incorporation, banking and business location information required under the Decision.
Existing suppliers should also be considered before the new rules take effect, particularly where there are regular dealings or the relevant thresholds are likely to be exceeded. Doing this in advance should reduce the risk of verification issues delaying future input tax recovery.
Conclusion
Decision No. 13 introduces a more structured verification process into the UAE VAT input tax regime from 1 October 2026.
For businesses, the practical effect is that supplier onboarding, transaction review and VAT record keeping will need to work together. The necessary checks should be built into ordinary procurement and payment processes, rather than dealt with only when a VAT return is being prepared.
Failure to carry out a prescribed check does not automatically mean that the related input VAT is lost. It can, however, place the taxable person within the deemed knowledge rule under Article 54(bis) if the FTA establishes that the relevant supply was connected with tax evasion.