Input VAT recovery: documented supplier verification required from 1 October 2026 (FTA Decision No. 13 of 2026)

The Federal Tax Authority has set out, in Decision No. 13 of 2026, the checks a business must perform on its suppliers and on each supply received. From 1 October 2026, where a supply chain turns out to be connected to tax evasion and those checks are absent, input VAT is not recoverable. The exemption for small purchases falls away entirely once the relationship with that supplier exceeds AED 100,000 (roughly USD 27,000) over twelve months.

What happened

The Federal Tax Authority (FTA), the UAE's tax administration, has issued Decision No. 13 of 2026, implementing Article 54 bis of the UAE VAT Law — the provision inserted by Federal Decree-Law No. 16 of 2025. The Decision lists the checks a purchaser must carry out on its suppliers and on the individual supplies it receives, and it applies to transactions from 1 October 2026 onwards. Article 54 bis allows the FTA to deny recovery of input VAT (the VAT a business pays on its own purchases and would normally reclaim) where a transaction forms part of a supply chain connected to tax evasion: where the purchaser actually knew, the denial is mandatory; where the purchaser should have known, it is discretionary. The decisive point is the third one: a purchaser is treated as having 'should have known' where it failed to carry out the verification steps prescribed by the Authority. Decision No. 13 sets out precisely what those steps are.

What changes in practice

The burden of proof moves onto the purchaser, on two levels. On the supplier: verification must be performed at the first transaction and repeated once twelve months have passed, checking identity documents against official registries, establishing who holds authority to represent the company, and confirming that the supplier has a real place of business consistent with the activity it claims to carry on. Three risk indicators must also be assessed, and they are named expressly: changes of address, changes of key personnel, and transactions out of proportion to the size and trading history of the business. Where annual purchases from that supplier exceed AED 375,000 (roughly USD 102,000), the purchaser must additionally obtain unqualified written confirmation from a bank licensed in the UAE that the supplier holds an account there, together with a review of public reviews and press coverage of the supplier. At transaction level the testing is heavier, because it applies to every single supply received: the purchaser must establish that the supplier's presence in that transaction has a genuine commercial rationale, that price and margin are not commercially indefensible, that the good or service falls within the activities covered by the supplier's licence, that title and provenance of the goods are sound, and — where an intermediary is involved — that the intermediary's role is also commercially explicable. Payment must be electronic: cash remains possible only where a documented commercial reason exists. Finally, Article 5 of the Decision requires a written policy identifying who performs the checks, who reviews them and who supervises them.

Who it applies to

All UAE companies registered for VAT, mainland and free zone alike, including those that invoice only overseas customers but purchase locally: logistics, marketing, IT, subcontracting, goods supply. Article 6 provides an exemption for supplies below AED 10,000 (roughly USD 2,700) excluding VAT. That exemption does not taper — it falls away in full — as soon as total purchases from that supplier exceed AED 100,000 (roughly USD 27,000) in the preceding twelve months, or are expected to exceed it in the following twelve. That is a little over AED 8,300 a month, roughly USD 2,300: almost any recurring supply relationship reaches that figure without anything unusual happening, so in practice the exemption protects far less than it appears to.

The exposure

Denial of input VAT recovery is final: it is not a penalty that is paid and closed, it is a credit that does not come back. And it does not require any participation in the evasion — it is enough not to have carried out the checks on a supplier that later turns out to sit in a contaminated chain. The second exposure is the calendar. 1 October 2026 is a matter of weeks away, and the checks do not apply only to new suppliers: they apply equally to suppliers a business has worked with for years, for whom almost no one holds on file the documentation the Decision now requires.

What to do now

Extract from the accounts the list of suppliers from whom more than AED 100,000 has been purchased over the last twelve months, and separate out those above AED 375,000, which additionally require the bank confirmation. For each, check that the file contains the Tax Registration Number (TRN, the UAE VAT registration identifier), a valid trade licence, evidence that the licensed activity genuinely covers what that supplier has invoiced, and the transaction documentation. Draft the internal policy required by Article 5, naming the individuals who perform, review and supervise the checks: the Decision asks for names, not generic functions. Move to electronic payment anything still settled in cash, or record the commercial reason for it in writing. Finally, the full text of the Decision and the FTA's operational guidance do not yet appear to have been published on tax.gov.ae: both should be checked before 1 October, since that is where the detail on the minimum documentation considered sufficient will appear.

Sources

Published 22 August 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.