Public Clarification VATP046: the FTA sets out how it will apply the VAT law amendments — presumption of knowledge for buyers of unverified suppliers, fixed establishment through staff at client premises, five-year limit on credits

On 4 September the Federal Tax Authority gathered into a single document the amendments to the VAT Decree-Law that took effect between 30 October 2024 and 1 January 2026. The law itself does not change: the clarification sets out how the authority will read it during an audit, and that is where the surprises are. The five-year window on VAT credits was covered on 1 September; the other two points, the presumption against the buyer and the foreign company that becomes a UAE VAT person because of where its staff work, had not been stated this plainly before.

What happened

On 4 September 2026 the Federal Tax Authority (FTA) published Public Clarification VATP046, ten bilingual pages consolidating the amendments to Federal Decree-Law 8/2017, the UAE VAT law, introduced by two decrees: Decree-Law 16/2024, in force since 30 October 2024, and Decree-Law 16/2025, in force since 1 January 2026. A Public Clarification is not new legislation: it is the document in which the authority states how it will read the law when it audits, and for a business it carries as much weight as the law itself, because it is what the auditor will have on the desk. The articles concerned are Article 1 on definitions, Article 48 on the reverse charge, Article 55 on the recovery of input VAT, Article 65 on tax invoices, Article 70 on credit notes, Article 74 on excess recoverable tax, Article 76 on penalties, and the new Article 54(bis). The five-year limit for claiming a refund of a VAT credit was covered in the 1 September update, and the clarification confirms it with an example: a credit arising in the period ending 31 January 2026 must be claimed by 31 January 2031. On older credits the document says nothing explicit, so that earlier article still stands. The focus here is on the other two points, which had not previously been set out in writing in this form.

What changes in practice

First, Article 54(bis). The FTA may deny the recovery of input VAT on a purchase where that supply, or the chain of supplies it forms part of, is connected with tax evasion and the buyer knew or should have known. That much has been the rule since 1 January 2026. What the clarification adds is the sentence that follows: the buyer is presumed to have known if it did not verify the supplier's status in accordance with FTA Decision 13/2026, the same decision that from 1 October 2026 makes input VAT recovery conditional on checking the supplier beforehand. Until now the burden of proving knowledge sat with the authority; from 1 October, where no check was made, the presumption runs against the buyer and it is the buyer who must rebut it. Second, Article 1. Employees of a foreign company who work on a regular basis from a client's premises in the UAE create a fixed establishment for VAT purposes: the company ceases to be a non-resident for VAT, and from that point the rules are those of a local business, starting with the obligation to register once taxable supplies exceed AED 375,000 a year, roughly USD 102,000. Previously a foreign company seconding staff to a UAE client could remain outside the UAE VAT system, with the client accounting for the tax under the reverse charge. Third, electronic invoicing: where the e-invoicing system requires it, input VAT can be recovered only by retaining the invoice in that format, and failure to issue an electronic invoice or credit note is among the violations penalised under Article 76. The reverse charge is also lightened: from 1 January 2026 an importer of goods or services no longer has to issue a self-invoice.

Who it applies to

Every business registered for VAT in the UAE. The Article 54(bis) presumption weighs most on companies that buy heavily from local suppliers, in particular trading, distribution and e-commerce, where suppliers change often and none has ever been checked individually. The fixed establishment point in Article 1 concerns foreign companies with operational staff in Dubai or Abu Dhabi at a client's site: construction, engineering projects, IT consulting, installations, long-term technical support. The e-invoicing part concerns anyone entering the scope of electronic invoicing, which from 1 July 2027 will be mandatory for all companies.

The exposure

The most concrete exposure is not the penalty: it is the input VAT lost on real purchases, paid for, with the invoice in hand. If a supplier later turns out to be invalid and there is no record of a check made before buying, the FTA does not have to prove anything: it starts from the position that the buyer should have known, and the invoice alone is no defence. For a company with hundreds of suppliers the exposure adds up. On fixed establishment the risk is of a different kind: a foreign company can find itself a UAE VAT person without ever having decided to be one, and discover it when the authority demands backdated registration together with late-registration penalties. One thing should be said plainly: the clarification does not widen the law, it explains it. A company that has already set up supplier verification for 1 October, and one whose staff in the UAE already have a clear VAT position, has nothing to redo.

What to do now

First, before 30 September: extract from the accounts the list of active suppliers with their VAT registration numbers and check each one on the FTA portal, keeping a dated screenshot. From October that check must be made before every purchase from a new supplier, and the archive of screenshots is the evidence that rebuts the presumption. Second, for foreign companies with staff in the UAE: take the employment contracts and the client contracts, note from when the staff have been working from the client's premises and how continuously, and calculate whether taxable supplies exceed AED 375,000 a year; if they do, UAE VAT registration should be assessed now, not when the letter arrives. Third, for everyone: open the latest VAT return, read the credit balance and put the end of the fifth year from the period in which it arose in the compliance calendar.

Sources

Published 5 September 2026 on the basis of public sources and official United Arab Emirates instruments. This is not legal or tax advice. Verify your position with a qualified professional before acting.