Summary
- The UAE Federal Tax Authority has issued Decision No. 13 of 2026 establishing verification requirements that taxable persons must follow before deducting input VAT.
- From 1 October 2026, businesses may need to demonstrate that they verified both the supplier and the validity and integrity of the underlying supply.
- Input VAT may be denied where a transaction is connected to tax evasion and the recipient knew, or should have known, of that connection, including where prescribed verification measures were not performed.
Extended article
The UAE Federal Tax Authority has introduced new due-diligence requirements affecting the recovery of input VAT. The rules take effect on 1 October 2026.
The underlying decision requires taxable persons to conduct verification procedures before deducting input VAT on supplies received from third parties.
The rules implement the UAE VAT Law’s anti-evasion provisions. They allow the Federal Tax Authority to deny input VAT recovery where a supply forms part of a transaction chain connected with VAT evasion and the recipient knew or should reasonably have known of that connection.
A taxable person may be treated as having the necessary awareness where it did not verify the validity and integrity of the supply in accordance with the prescribed measures. A valid tax invoice may therefore no longer be sufficient on its own to protect the deduction.
The available external analysis describes two principal levels of verification:
Supplier verification
Businesses may need to verify the identity and legitimacy of the supplier, including its incorporation or identification information, business premises and VAT status. Enhanced checks may be relevant for new suppliers or suppliers not verified during the prescribed review period.
Supply verification
The recipient must consider whether the supplied goods or services are consistent with the supplier’s licensed and ordinary business activities. Businesses should also retain evidence supporting the commercial reality of the transaction.
The framework places increased importance on documentation. Businesses should be able to demonstrate not only that a tax invoice was received, but also that appropriate checks were completed and that responsibilities for those checks were assigned internally.
The publicly available sources also refer to a limited exclusion for supplies below AED 10,000 excluding VAT, subject to stated conditions and an aggregate supplier threshold of AED 100,000. Because the detailed operation of these thresholds depends on Decision No. 13 of 2026, businesses should validate the conditions against the official text before relying on the exclusion. [linkedin.com]
The new requirements are likely to affect procurement, accounts payable, supplier onboarding, vendor-master-data controls and VAT return preparation. Businesses should ensure that evidence of supplier and transaction checks is retained together with the normal invoice and payment documentation.
A proportionate risk-based process could include supplier identity and VAT-registration validation, consistency checks between the supplier’s activity and the goods or services invoiced, review of bank-account details where required, and documented escalation of unusual transaction patterns. These are implementation considerations, and the exact controls adopted should be aligned with the requirements of Decision No. 13 of 2026.
External sources
- Overview of UAE FTA Decision No. 13 of 2026 [lexismiddleeast.com]
- Detailed explanation of the UAE input VAT verification rules [nrdoshi.ae]
- VATupdate summary of the new UAE due-diligence rules [vatupdate.com]
Other articles
- The UAE’s Federal Tax Authority has issued Decision No. 13 of 2026, effective October 1, 2026, introducing mandatory due diligence requirements for businesses to recover input VAT.
- This decision allows the FTA to deny input VAT recovery if a supply or supply chain is linked to tax evasion and the taxable person knew or should have known of this connection, emphasizing the need for comprehensive supplier and transaction verification.
- Businesses must now proactively review and enhance their procurement, supplier onboarding, finance, and VAT control processes, including verifying supplier identity, assessing supply validity, and documenting these procedures, to comply with the new rules and safeguard input VAT recovery.
Source EY
