FTA Introduces New Supplier Verification Requirements Before Input VAT Deduction
Federal Tax Authority Decision No. 13 of 2026 | Issued: 22 July 2026 | Effective: 1 October 2026
The UAE Federal Tax Authority (“FTA”) has issued Federal Tax Authority Decision No. 13 of 2026, establishing detailed measures, procedures and conditions that taxable persons must follow when verifying the validity and integrity of supplies before deducting input VAT.
The Decision represents an important development in UAE VAT compliance. From 1 October 2026, businesses claiming input VAT will need to go beyond simply obtaining a valid tax invoice and should have appropriate procedures and evidence demonstrating that they have carried out the required checks on both their suppliers and the supplies received.
The Decision was issued pursuant to the UAE VAT legislation and provides the practical framework for applying the requirements relating to verification of supplies before input tax deduction.
Why is this Decision important?
The new rules place greater emphasis on supplier due diligence, transaction verification and documented evidence.
In practical terms, businesses will need to be able to demonstrate that they have taken reasonable steps to establish that:
- The supplier is a genuine and identifiable business or individual;
- The supplier has an actual place of business;
- The supplier’s activities are consistent with the nature of the supplies provided;
- The transaction has genuine commercial substance;
- Payment arrangements are commercially reasonable;
- The goods or services received are genuine and properly attributable to the supplier; and
- There are no unexplained circumstances or indicators that should raise concerns regarding tax evasion.
The FTA’s approach effectively makes supplier and transaction due diligence an important component of the input VAT recovery process.
1. Verification of the supplier
Before deducting input VAT, taxable persons are required to undertake specified checks on their suppliers.
Where the supplier is an individual
Where a supplier is a natural person, the taxable person must:
- Obtain a copy of valid identification, such as an Emirates ID or passport; and
- Meet the supplier, either physically or virtually, before the supply is made.
This requirement means that businesses should consider incorporating supplier identification and onboarding procedures into their procurement processes.
Where the supplier is a legal entity
For companies and other legal persons, the taxable person must:
- Verify the supplier’s incorporation through official databases or obtain a certificate of incorporation;
- Confirm that the incorporation information is valid and consistent with the supplier’s name, address, employees and other relevant information; and
- Verify the identity of the director, agent or employee authorised to represent the supplier by obtaining valid identification.
Businesses should therefore maintain a proper supplier onboarding file rather than relying solely on information appearing on the supplier’s invoice.
2. Verification of the supplier’s place of business
The Decision requires taxable persons to verify that the supplier has an actual place of business.
This can be done through appropriate electronic means or by conducting a field visit.
Businesses should also consider whether the supplier’s premises are consistent with the nature of its activities.
For example, where a supplier claims to conduct substantial trading or manufacturing activities, but the available information suggests that it has no appropriate premises or operational capacity, this may warrant further investigation and documentation.
3. Supplier risk indicators
The Decision introduces specific risk indicators that businesses should consider when assessing their suppliers.
Particular attention is required where:
- The supplier has changed its address more than twice during the previous 12 months;
- The supplier has changed its key employees or managers more than twice during the previous 12 months; or
- The supplier has entered into transactions that appear disproportionate or unexpected when compared with the size and history of its business.
The presence of a risk indicator does not necessarily mean that the supplier cannot be used.
However, where one of these indicators exists, the taxable person must retain a clear and justified explanation for the circumstances and be able to provide that explanation to the FTA upon request.
This makes documentation particularly important. Businesses should avoid simply noting that a supplier was “approved” and instead retain evidence supporting the conclusion reached.
4. Additional checks for suppliers exceeding AED 375,000
Enhanced verification requirements apply where the value of supplies received from a supplier:
- Exceeded AED 375,000 during the previous 12 months; or
- Is expected to exceed AED 375,000 during the following 12 months.
In these circumstances, the taxable person must:
Verify the supplier’s bank account
The business must obtain written confirmation issued by an authorised bank in the UAE confirming that the supplier maintains a bank account.
The confirmation must not contain relevant reservations or conditions.
Importantly, the bank confirmation does not necessarily have to be addressed to the recipient of the supply.
Review publicly available information
The taxable person must also review and assess publicly available reviews and media coverage relating to the supplier from reliable sources.
The review should consider whether the information is consistent with:
- The nature of the supplier’s business;
- The size of the supplier’s business; and
- Any potential indicators of suspected tax evasion.
This means that supplier due diligence for higher-value relationships should extend beyond the documents provided directly by the supplier.
5. Verification of the actual supply
The new requirements do not stop at verifying the supplier.
Taxable persons must also verify the validity and integrity of each taxable supply received or accepted.
This includes assessing the circumstances surrounding the transaction.
Genuine commercial reasons
Businesses should conduct a general assessment of the supply and confirm that the supplier’s involvement in the transaction is based on genuine commercial reasons.
The question is essentially whether the transaction makes commercial sense based on the circumstances and available evidence.
6. Payment arrangements must be commercially justified
The Decision places particular emphasis on payment arrangements.
The payment method and conditions should be commercially justifiable.
Additional attention is required where:
- A third party is involved in making or receiving the payment; or
- Payment is made to a bank account outside the supplier’s country of incorporation.
In such cases, the business should have a reasonable commercial explanation that is consistent with the available evidence.
Electronic payments
The consideration for supplies should generally be paid through electronic means.
Where payment is made in cash, the business must be able to demonstrate:
- A documented commercial reason for using cash;
- Compliance with applicable tax legislation thresholds; and
- That the payment can be easily verified.
Businesses should therefore review their existing cash-payment practices before the rules become effective.
7. Pricing and profit margins
The taxable person must also consider whether the price or profit margin associated with a transaction is commercially reasonable.
Prices or profit margins that are significantly different from market conditions should have a clear explanation.
This does not mean that every transaction must be priced exactly at market value. However, where pricing appears unusual, businesses should retain evidence supporting the commercial rationale.
Examples could include:
- Special volume discounts;
- Long-term contractual arrangements;
- Introductory pricing;
- Urgent procurement;
- Related commercial circumstances; or
- Other legitimate business reasons.
8. Supplies should be consistent with the supplier’s licensed activities
Another important requirement is verifying that the goods or services supplied are consistent with the supplier’s:
- Ordinary business activities; and
- Activities permitted under its commercial licence.
This is particularly relevant when onboarding new suppliers or engaging suppliers for unusual categories of goods or services.
Businesses should consider obtaining and retaining copies of relevant commercial licences and periodically reviewing whether the supplier’s activities remain consistent with the nature of supplies being received.
9. Verification of goods and ownership
For supplies involving goods, the taxable person should verify:
- The authenticity of the goods;
- The origin of the goods;
- The supplier’s ownership of the goods; or
- The supplier’s legal right to dispose of the goods.
This requirement may be particularly relevant for businesses involved in trading, distribution, commodities and other sectors where goods may pass through multiple intermediaries.
10. Additional checks for intermediaries
Where a supplier acts as an intermediary, the taxable person should establish that there is a clear and commercially justifiable reason for the intermediary’s involvement.
Businesses should therefore understand the commercial chain rather than relying solely on the immediate supplier’s invoice.
Where an intermediary is involved, supporting documentation such as contracts, purchase orders, correspondence and other transaction records may be useful in demonstrating the commercial rationale.
11. Verification must be documented
One of the most significant practical requirements is that businesses must document the verification procedures performed and retain supporting records.
The records should enable the FTA to verify that the required checks were actually carried out.
Businesses should therefore consider developing a standardised supplier and transaction verification checklist.
Potential supporting evidence could include:
- Identification documents;
- Trade licences;
- Certificates of incorporation;
- Official registry searches;
- Evidence of the supplier’s place of business;
- Supplier bank confirmation where applicable;
- Public-source due diligence;
- Contracts and purchase orders;
- Delivery notes;
- Goods receipt records;
- Payment evidence;
- Explanations for unusual payment arrangements;
- Evidence supporting unusual pricing;
- Documentation relating to intermediaries; and
- Internal approval or review records.
The Decision does not prescribe one specific form of documentation for every transaction. Businesses should therefore adopt a risk-based approach while ensuring that the evidence retained demonstrates how the required verification steps were performed.
12. A written internal policy is required
Taxable persons must maintain a documented policy setting out their verification procedures.
The policy should clearly identify:
- The individuals responsible for performing the verification;
- Those responsible for reviewing the verification;
- Those responsible for supervising the process; and
- The powers and responsibilities of each person.
This means the new requirements should not be treated solely as an accounting or VAT-return procedure.
Businesses should consider integrating the process across procurement, finance, accounts payable, tax and management functions.
13. How often must suppliers be verified?
Supplier verification is required:
- When dealing with the supplier for the first time; or
- When dealing with an existing supplier where the supplier has not been verified during the preceding 12 months.
In addition, each taxable supply received or accepted must be verified in accordance with the requirements applicable to the supply.
This creates two distinct levels of control:
Supplier-level verification → performed initially and refreshed when required.
Supply-level verification → performed for each taxable supply.
Businesses should therefore consider designing their systems so that supplier due diligence and transaction-level checks are separately documented.
14. The AED 10,000 exception
The Decision provides an important exception for smaller transactions.
A taxable person may disregard the prescribed verification measures for a taxable supply where the consideration, excluding VAT, is less than AED 10,000.
However, this exception does not apply where the total value of supplies received from the same supplier:
- Exceeded AED 100,000 during the previous 12 months, or
- Is expected to exceed AED 100,000 during the following 12 months.
Therefore, businesses should not assess the AED 10,000 threshold only on an invoice-by-invoice basis.
A supplier’s aggregate 12-month spend must also be monitored.
Key thresholds
|
Threshold |
Requirement |
|
Below AED 10,000 per taxable supply |
Verification measures may generally be disregarded |
|
Supplier exceeds or is expected to exceed AED 100,000 over 12 months |
The AED 10,000 individual-supply exception does not apply |
|
Supplier exceeds or is expected to exceed AED 375,000 over 12 months |
Additional bank-account and public-source verification requirements apply |
The rolling 12-month nature of these thresholds means that businesses should consider implementing appropriate supplier-spend monitoring rather than relying on annual budgets alone.
What should businesses do before 1 October 2026?
Businesses should use the period before the effective date to assess whether their existing procurement and VAT controls can support the new requirements.
Recommended actions
- Review your major suppliers
Identify suppliers that exceed, or are expected to exceed, AED 100,000 and AED 375,000 over a rolling 12-month period.
- Strengthen supplier onboarding
Ensure supplier files contain appropriate identification, incorporation, licence and representative information.
- Verify places of business
Develop a consistent process for confirming that suppliers have genuine business premises appropriate to their activities.
- Establish a risk assessment process
Introduce procedures for identifying and documenting unusual changes in supplier addresses, personnel, transaction volumes, values and business activities.
- Review payment arrangements
Identify transactions involving third-party payments, foreign bank accounts or significant cash payments and ensure the commercial rationale is documented.
- Review supplier activities
Confirm that goods and services purchased are consistent with the supplier’s licensed and ordinary business activities.
- Introduce transaction-level verification
Ensure that the accounts payable process captures sufficient evidence that each taxable supply is genuine and commercially justified.
- Establish a written verification policy
Clearly define who performs, reviews and supervises the verification procedures.
- Update systems and workflows
Consider adding supplier verification fields, approval steps and documentation requirements to procurement and accounts payable systems.
- Train relevant personnel
The requirements should be communicated not only to the tax team but also to procurement, finance, accounts payable and relevant management personnel.
Conclusion
FTA Decision No. 13 of 2026 marks an important development in UAE VAT compliance by introducing detailed requirements for verifying both suppliers and supplies before input VAT is deducted.
The key change for businesses is the need to demonstrate that appropriate due diligence has been performed and documented. A tax invoice alone may no longer be sufficient to address the compliance risks associated with a transaction where circumstances indicate potential concerns.
Businesses should therefore begin reviewing their supplier onboarding, procurement, accounts payable and VAT procedures well before 1 October 2026, particularly for higher-value and higher-risk suppliers.
The most important practical takeaway is simple: businesses should be able to demonstrate not only that VAT was charged, but also that they took appropriate steps to establish the validity and integrity of the underlying supply.
