New UAE Rules Require Supplier Checks Before You Recover Input Tax
- 12.09.2026
- Posted by: Uwe Hohmann
- Categories: Tax, Dubai
From 01.10.2026, every business registered for VAT (Value Added Tax) in the UAE will need to check its suppliers, and the supplies it receives, before claiming back input tax. The FTA (Federal Tax Authority) set out what those checks involve in Decision No. 13 of 2026. For anyone running a business in the UAE, supplier due diligence is moving from good practice to a documented requirement tied directly to VAT recovery.
What the New FTA Decision Covers
The decision gives effect to Article 54 of the UAE VAT Law and applies to all taxable persons, meaning any business that is registered, or required to register, for VAT. It divides the obligations into two parts. The first concerns the supplier itself. The second concerns each individual transaction. Both sets of checks must be completed before input tax is deducted, and both must be recorded.
A valid tax invoice is no longer the whole story. The FTA will expect to see that you took reasonable, evidenced steps to confirm that the business you bought from is real and that the transaction itself was genuine.
Knowing Who Your Supplier Really Is
The first step is confirming identity. If the supplier is an individual, you will need a copy of valid proof of identity, such as an Emirates ID or passport, and you must meet them before the supply takes place. That meeting can be face to face or by video call.
Where the supplier is a company, you need to confirm that it is properly incorporated, either through official registers or by obtaining its company licence. In practice, most UAE businesses rely on an active business licence. The details must match what you know about the supplier, including its name, address, and staff, so you should check the business licence rather than simply file it. You also need a copy of valid identification for the Manager, agent or employee who represents the supplier in its dealings with you.
The rules then look at premises. You must confirm that the supplier has a real place of business, either through suitable online checks or a physical visit, and that those premises make sense for what the supplier does. A Google Maps pin, an Ejari tenancy registration or a title deed for the premises are all useful supporting evidence. Bear in mind that a map listing only shows where a business says it is, so it works best alongside a tenancy document or a site visit. A company claiming to move large volumes of physical goods, for example, should have facilities that fit that kind of operation.
Red Flags the FTA Wants You to Spot
The decision lists three risk indicators.
- A supplier that has changed its address more than twice in the past 12 months.
- A supplier that has changed its key people, such as managers or your usual contacts, more than twice in the same period.
- A supplier whose transactions look out of proportion, in volume, value or type, to the size and track record of its business.
One of these indicators does not automatically rule a supplier out. However, if any of them applies, you must keep a clear, reasoned explanation on file and be ready to share it with the FTA on request. That explanation has to be consistent with the rest of the information you hold, so it cannot simply be a box ticked after the fact.
Additional Checks for Larger Supplier Relationships
Where your purchases from a single supplier have exceeded AED 375,000 over the past 12 months, or are expected to exceed that amount over the coming 12 months, further checks apply. Many business owners will recognise this figure, as it mirrors the mandatory VAT registration threshold.
For these suppliers, you need a written letter from a bank authorised in the UAE confirming that the supplier holds an account with it. An IBAN (International Bank Account Number) verification letter is the usual form this takes. The letter should not carry any relevant conditions or reservations, although it does not have to be addressed to you. You should also review what reliable public sources say about the supplier, including reviews and media coverage, and satisfy yourself that the picture is consistent with the size and nature of its business and does not suggest possible tax evasion.
Checking Every Supply, Not Just the Supplier
Verifying the supplier once is not enough. Each transaction also needs to be assessed on its own merits. You should be able to show that the deal has a genuine commercial basis and that the supplier’s involvement makes business sense.
Payment terms receive particular attention. Payments should be made electronically as a rule. Cash is only acceptable where there is a documented business reason, the amount stays within the limits set by tax legislation, and the payment can be easily traced. If a third party is involved in making or receiving payment, or if money is sent to a bank account outside the country where the supplier is incorporated, there must be a reasonable commercial explanation that fits with everything else you know.
The FTA also expects you to look at the substance of the supply, and this breaks down into tests that are easy to run together by mistake. Prices and margins should not be far from market levels without a clear reason. Separately, what you are buying should fall within the supplier’s normal line of business and the activities listed on its trade licence. Separately again, for goods, you should be comfortable about where they came from, that they are authentic, and that the supplier actually owns them or has the right to sell them. Where the supplier is acting as a middleman, its role in the chain needs a clear and credible commercial justification.
Documentation and a Written Internal Policy
The decision sets out how these checks fit into your routine. You must carry out supplier checks when you first start working with a supplier. For ongoing relationships, they must be checked whenever you deal with a supplier who has not been verified in the previous 12 months. This is not quite the same as an annual review, as a supplier you have not used for some time needs to be checked again before the next transaction rather than on a fixed date. Supply checks apply to every taxable supply you receive.
Every step must be documented, and supporting records kept, so that the FTA can confirm the checks were actually done. You also need a written policy that names the people responsible for carrying out, reviewing and supervising the verification process, and sets out their authority and responsibilities. This policy should be stored alongside the other records you are required to keep for tax purposes.
The Exception for Smaller Transactions
There is some relief for low value purchases. You may skip the checks for taxable supplies where the consideration, excluding VAT, is below AED 10,000. Both conditions must hold, however. The exception falls away if your total purchases from that supplier have exceeded AED 100,000 over the past 12 months, or are expected to exceed that amount over the next 12 months, regardless of how small each individual invoice is.
In practice, this means a regular supplier sending many small invoices can still fall within the full rules. Tracking your cumulative spend per supplier will be essential to knowing which relationships need attention.
Which Thresholds Apply to Your Purchases
The table below sets out how the three thresholds work together.
| Value of supplies | What applies |
|---|---|
| Supply below AED 10,000 excluding VAT, and supplier total at or below AED 100,000 | No verification required, the exception applies. Both conditions must be met |
| Supply of AED 10,000 or above excluding VAT | Full supplier and supply verification, documented and retained |
| Supplier total above AED 100,000 over the previous or next 12 months | Full verification on every supply from that supplier, however small the invoice |
| Supplier total above AED 375,000 over the previous or next 12 months | Full verification, plus a bank confirmation letter and a review of publicly available information |
What This Means for Your Business
With the rules taking effect on 01.10.2026, there is limited time to prepare. Input tax is often a significant amount of money for a business, and claims could be challenged where the required checks cannot be shown.
The sensible starting point is to review your current supplier list, identify which relationships cross the AED 100,000 and AED 375,000 thresholds, and work out what information you already hold and what is missing.
From there, most businesses will need a standard verification checklist, a clear filing structure for the evidence, and a short written policy that assigns responsibility within the finance and procurement teams. For a typical corporate supplier, the file would hold the trade licence, identification for the authorised representative, evidence of the premises such as an Ejari tenancy registration or title deed, a bank confirmation letter where the AED 375,000 threshold applies, and a note of any risk indicators with the reasoning for proceeding. Building this into your onboarding and approval process now will make ongoing compliance far easier than piecing records together during an audit.
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