From 1 October 2026, recovering input VAT in the UAE stops being a paperwork exercise. If you hold a valid tax invoice but never looked into who issued it, that invoice may no longer be enough.
FTA Decision No. 13 of 2026 sets out checks that a taxable person has to carry out on the supplier and on the supply itself before deducting input tax. The checks scale with the value of the transaction. Small purchases are largely left alone. Larger ones now carry an expectation that you knew who you were dealing with and why the transaction made commercial sense.
Most finance teams will find this manageable. What catches people out is that the obligation sits with the buyer, not the supplier, and it applies to purchases you are already making from suppliers you already use. There is no grandfathering.
What has actually changed
Until now, the practical test for recovering input VAT came down to three things: you received a taxable supply, you held a valid tax invoice, and you intended to use the purchase for taxable business activity. Whether the supplier was genuine was, in most cases, somebody else's problem.
The new decision adds a fourth requirement. Before you deduct, you need to have taken reasonable steps to confirm that the supplier exists and operates, and that the supply itself is commercially real. The FTA has set out what those steps look like and when they apply.
The shift is one of responsibility. A tax invoice now supports a deduction; it no longer carries it on its own.
| Area | Before 1 October 2026 | From 1 October 2026 |
|---|---|---|
| Basis for deduction | Valid tax invoice plus taxable use | Valid tax invoice, taxable use, and documented verification |
| Supplier due diligence | Commercial choice, not a tax requirement | Required above the small-value threshold |
| Checking the transaction | Not required for VAT purposes | Commercial rationale, pricing and payment flow reviewed |
| Cash payments | Allowed, subject to general limits | Allowed, but the commercial reason must be documented |
| Written procedure | Optional internal control | Expected, with named responsible people |
| If you get it wrong | Invoice defects challenged on audit | Input tax may be denied outright |
Where this comes from in law
Federal Decree-Law No. 16 of 2025 amended the UAE VAT Law and introduced Article 54 bis. That article gives the Federal Tax Authority the power to require verification of supplies and suppliers before input tax is deducted, and to deny recovery where a taxable person knew, or should have known, that a supply was connected with tax evasion.
FTA Decision No. 13 of 2026 is the instrument that puts detail behind Article 54 bis. It was issued during 2026 and takes effect on 1 October 2026.
One point on dates. Professional commentary published by the major firms gives different issue and publication dates for the decision, ranging across July and August 2026. The effective date is consistent everywhere at 1 October 2026. If you need the exact issue date for a policy document or a board paper, take it from the Federal Tax Authority's own published copy rather than from secondary summaries.
Who this applies to
Every VAT-registered business in the UAE that recovers input tax. There is no exemption by sector, by size, or by free zone status.
It bites hardest where purchasing is decentralised or high in volume. Construction and contracting, trading and distribution, logistics, hospitality, retail, and professional firms that subcontract work all sit in that category. So does any business that buys through intermediaries or brokers, because the decision asks specifically why an intermediary is in the chain.
If your purchases are few, large, and from long-standing suppliers you know well, the practical work is light. If you onboard dozens of new suppliers a quarter, it is not.
The three thresholds
The decision works on transaction value excluding VAT. Three numbers matter.
| Threshold | What it governs | What you have to do |
|---|---|---|
| AED 10,000 | Small-value exception, applied per supply | No verification required, unless the AED 100,000 aggregate test is triggered |
| AED 100,000 | Aggregate purchases from one supplier | Where breached, the small-value exception is lost for that supplier and verification applies to all supplies from them |
| AED 375,000 | Enhanced verification | Full verification plus a bank confirmation and a review of public information about the supplier |
Under AED 10,000 per supply
No verification obligation. This keeps ordinary operating expenses out of scope: stationery, taxi fares, small tools, one-off repairs, minor subscriptions. The exception is applied supply by supply, not invoice by invoice, so splitting a single supply across several invoices to stay under the line will not work and would be difficult to defend on audit.
Between AED 10,000 and AED 375,000
Standard verification applies. You confirm the supplier is who they say they are and that they actually operate, and you satisfy yourself that the supply itself makes commercial sense. Verification has a twelve-month life. If you have not verified a supplier within the preceding twelve months, you carry out the checks again before deducting.
Above AED 375,000
Everything in the standard tier, plus written confirmation from a bank authorised in the UAE that the supplier holds an account with it, and a review of publicly available information about the supplier, including reviews and media coverage from reliable sources.
The bank confirmation is the one that needs lead time. It is a letter the supplier has to request from their bank, and banks do not turn these around in an afternoon. If you have high-value suppliers, start asking now.
How the AED 100,000 test actually works
This is the part of the decision most commonly described incorrectly, so it is worth being precise.
The small-value exception is lost for a supplier where the total value of supplies received from that supplier either exceeded AED 100,000 over the previous twelve months, or is expected to exceed AED 100,000 over the next twelve months.
Two things follow from that. The test looks backwards and forwards, so a new supplier you have just signed a six-figure annual contract with falls in from the first invoice, even though your historic purchases from them are nil. And once the threshold is crossed, the exception goes for that supplier entirely. Their AED 3,000 invoices need the same verification as their AED 30,000 ones.
Verifying the supplier
What you do depends on whether the supplier is an individual or a company.
Where the supplier is a natural person
- Obtain and check a valid identity document, being an Emirates ID or a passport.
- Meet the person, either face to face or through a video meeting.
The meeting requirement surprises people. A video call is accepted, so this is not as onerous as it first reads, but a note of the call needs to go on file.
Where the supplier is a legal person
- Confirm the company is properly incorporated, using official databases or its incorporation and licensing documents.
- Verify the identity of the person authorised to act for the company.
- Confirm the company has an actual place of business, either through electronic means or by visiting the premises.
A trade licence on its own does not satisfy the third point. The question the FTA is asking is whether the business physically exists and operates, not whether it is registered. Keep dated evidence of each step: a saved licence PDF with no download date, and no record of who checked it, is weak evidence twelve months later.
Verifying the supply
The second half of the exercise looks at the transaction rather than the counterparty. The decision points at the following.
- Whether the transaction has a genuine commercial rationale.
- How payment flows, and by what method.
- Whether the consideration is consistent with market rates for that good or service.
- Whether the goods or services fall within the activities the supplier is licensed to carry out.
- Ownership and origin of the goods.
- Where the supplier is acting as an intermediary, why an intermediary is involved at all.
The licensed-activity point deserves attention. A supplier licensed for general trading who invoices you for engineering consultancy is a question you should be able to answer before you claim the VAT, not after the FTA asks.
Pricing works both ways. Significantly above market invites a question about what else the payment covers. Significantly below market invites a question about whether the supply is what the invoice says it is.
Warning signs the decision names
Two indicators are called out specifically.
- The supplier has changed its address or its key employees more than twice in the previous twelve months.
- The size of the transactions is out of proportion to the size of the supplier's business.
Neither is fatal on its own. Businesses relocate and staff move. But where one of these is present, the expectation is that you looked harder rather than filed the invoice and moved on.
In practice a few other patterns tend to travel with these: a newly registered entity winning a large contract immediately, a supplier whose bank account is in a different name, addresses shared with unconnected businesses, and pressure to pay in cash where the sector would normally settle by transfer.
Cash payments
Cash is not prohibited. Where cash is used, there has to be a documented commercial reason for settling that way, the amount has to sit within the limits set by the applicable legislation, and the payment has to be capable of being verified without difficulty.
Having always paid a supplier in cash is not a commercial reason. If a supplier of any scale will only take cash, that is worth understanding before the next invoice rather than at audit.
The written policy, and who owns it
The decision expects a documented procedure rather than an informal habit, and it expects named people to be responsible for running it, reviewing it and supervising it. A one-page policy that nobody applies is worse than no policy, because it establishes a standard you then fail to meet.
| Role | Responsibility | Evidence produced |
|---|---|---|
| Procurement | Collects supplier documents at onboarding and at renewal | Licence, ID, incorporation proof, premises confirmation, all dated |
| Accounts payable | Checks the threshold tier before posting and blocks payment where verification is missing | Verification status recorded against each supplier record |
| Finance manager | Reviews flagged cases and approves exceptions | Signed note explaining any deduction taken on incomplete evidence |
| Tax or compliance owner | Maintains the policy, reviews it periodically and handles FTA queries | Policy document with version history and review dates |
| Senior management | Supervises and signs off the policy | Board or management approval on record |
For a smaller business, one person can hold several of these. What matters is that the roles are written down and that somebody other than the person collecting the documents is checking them.
What happens if you get it wrong
The direct consequence is denial of input tax recovery. Where the FTA concludes that a taxable person knew, or should have known, that a supply was connected with tax evasion, it can refuse the deduction.
The phrase that does the work there is "should have known". It sets an objective standard. The question is not whether you were told that something was wrong; it is whether a reasonable business carrying out the checks the decision describes would have noticed.
Follow-on effects are the ones that hurt most. A denied deduction means an under-declared VAT position for the period, which carries the usual penalty and interest exposure, and it usually prompts the FTA to look across other periods rather than at one invoice.
Supplier and supply checklists
Supplier checklist
- Trade licence, downloaded and dated, checked against an official source.
- Incorporation or registration documents for a company.
- Emirates ID or passport for an individual supplier or for the authorised representative.
- Record of the meeting or video call with an individual supplier.
- Evidence that the place of business exists, whether a site visit note, dated photographs, or a verified electronic check.
- Bank details confirmed in the supplier's own name.
- For supplies above AED 375,000, the bank confirmation letter from a UAE-authorised bank.
- For supplies above AED 375,000, a note of the public information review with the sources checked and the date.
- Date of verification recorded, with a twelve-month review date set.
Supply checklist
- Contract, purchase order or written scope covering the supply.
- Proof of delivery or evidence that the service was performed.
- A price comparison or a note explaining why the price is reasonable.
- Confirmation that the supply falls within the supplier's licensed activities.
- Payment made to the supplier's own account, by traceable method.
- Where paid in cash, a written note of the commercial reason.
- Where the supplier is an intermediary, a note explaining their role in the chain.
- For goods, evidence of origin and of the supplier's right to sell them.
A worked example
A Dubai company buys IT support from a small local provider at AED 8,000 a month, excluding VAT. Each invoice is below AED 10,000, so on the face of it the small-value exception applies and no verification is needed. Annual spend is AED 96,000, which is under the AED 100,000 aggregate threshold.
In March the company adds a project of AED 12,000 for a server migration. That single supply is above AED 10,000, so it needs verification on its own. It also pushes expected annual spend from that supplier to AED 108,000, past the aggregate threshold.
From that point the small-value exception is gone for this supplier. The routine AED 8,000 monthly invoices now need the same verification as the project invoice. The company has to confirm the provider is incorporated and operating, verify its authorised representative, confirm it has real premises, and satisfy itself that the services fall within its licence and are priced sensibly.
Nothing about the relationship changed. Only the spend did. This is why monitoring aggregate spend per supplier matters more than watching individual invoice values.
Twelve things to do before 1 October
- Pull a report of supplier spend for the last twelve months and sort it by supplier, not by invoice.
- Flag every supplier above AED 100,000 in that period, and every supplier you expect to exceed it in the next twelve months.
- Flag every individual supply above AED 375,000, past and forecast.
- Check what verification evidence you already hold. Most businesses have licences on file and little else.
- Write the gap list: which suppliers are missing what.
- Draft the verification policy, including the three thresholds and the twelve-month refresh.
- Name the people responsible for collecting, checking, approving and supervising.
- Add a verification status field and a verification date to your supplier master data.
- Build a block into accounts payable so an unverified supplier above the threshold cannot be posted without an approval.
- Start requesting bank confirmation letters for your AED 375,000-plus suppliers now, because these take time.
- Brief procurement, accounts payable and any site teams who buy locally.
- Set a review date in the policy and put the first one in the calendar.
If you only have time for three of these, do the first, the second and the tenth.
Mistakes worth avoiding
- Treating the AED 10,000 figure as a monthly or annual allowance. It applies per supply.
- Assuming long-standing suppliers are exempt. Length of relationship is not a substitute for verification.
- Collecting documents and never looking at them. An expired licence sitting in a folder is evidence that you did not check.
- Verifying once and treating it as permanent. The twelve-month refresh is part of the requirement.
- Leaving site-level and petty cash purchasing outside the process. Those are exactly the purchases that aggregate quietly past AED 100,000.
- Waiting for the supplier to offer the information. The obligation is yours.
How A&A Tax Consultancy can help
Our VAT compliance audit reviews your existing input tax position and supplier records against the new requirements, and tells you where the gaps are before the FTA does. VAT advisory covers the judgement calls: thresholds in unusual fact patterns, intermediaries, related-party pricing, and how far verification needs to go in your sector.
For ongoing work, our VAT return filing service builds the verification check into the filing process rather than bolting it on, and our VAT impact assessment quantifies what the change puts at risk in recoverable VAT. Businesses not yet registered can start with VAT registration.
Where supplier checks overlap with anti-money-laundering obligations, our AML compliance service keeps the two sets of due diligence aligned so your team collects one set of documents rather than two. Related work sits under accounting, audit and corporate tax.
To discuss how this applies to your purchasing, get in touch or see our full range of VAT services in Dubai.
Frequently asked questions
When does FTA Decision No. 13 of 2026 take effect?
It applies from 1 October 2026. There is no transitional period and no grandfathering for existing suppliers, so purchases made on or after that date need verification where the thresholds are met, including from suppliers you have used for years.
Does the AED 10,000 threshold include VAT?
No. The threshold is applied to the value of the supply excluding VAT, and it applies per supply rather than per invoice or per period. Splitting one supply across several invoices to stay below the figure will not put it outside the requirement.
What happens if I buy from the same supplier repeatedly in small amounts?
Watch the aggregate. If your purchases from one supplier exceeded AED 100,000 over the previous twelve months, or you expect them to exceed it over the next twelve, the small-value exception no longer applies to that supplier and every supply from them needs verification.
Do I need to verify a supplier again each year?
Yes, where you have not verified them within the preceding twelve months. Set a verification date against each supplier record and a review date twelve months later, so the refresh happens automatically rather than being remembered.
What extra checks apply above AED 375,000?
Two. You need written confirmation from a bank authorised in the UAE that the supplier holds an account there, and you need to review publicly available information about the supplier, including reviews and media coverage from reliable sources. Request the bank letter early, as these take time to obtain.
Can I still pay suppliers in cash?
Yes, provided there is a documented commercial reason for paying in cash, the amount is within the limits set by the applicable legislation, and the payment can be verified without difficulty. Habit is not a commercial reason.
Does this apply to free zone companies?
Yes. The requirements apply to every VAT-registered business recovering input tax in the UAE. There is no relief based on free zone status, sector or company size.
What if a supplier refuses to provide the documents?
The obligation sits with you as the buyer, so a refusal does not remove it. You either obtain the evidence another way, accept that you cannot support the deduction, or reconsider the relationship. A supplier unwilling to confirm that it exists and operates is itself a warning sign.
Will a valid tax invoice still be enough on its own?
No, not above the small-value threshold. A tax invoice remains necessary, but from 1 October 2026 it supports the deduction alongside verification evidence rather than carrying it by itself.
What is the penalty for getting this wrong?
The FTA can deny the input tax deduction where it concludes you knew, or should have known, that the supply was connected with tax evasion. A denied deduction leaves an under-declared VAT position for the period, with the penalty and interest exposure that follows.
This article is provided for general informational purposes only and does not constitute tax, accounting or legal advice. It reflects our reading of FTA Decision No. 13 of 2026 and Article 54 bis of the VAT Law at the date of publication. The Federal Tax Authority's published text governs, and the application of these requirements depends on the facts of each business. Businesses should refer to current UAE legislation and Federal Tax Authority guidance and obtain professional advice where appropriate.