A VAT invoice has always been the starting point for being able to claim input tax in the UAE, and from the 1st of October 2026, it will no longer be enough on its own.
FTA Decision No. 13 of 2026 means that before a business deducts VAT it has paid on purchases, it must now first verify that the supplier is even real and that the transaction actually happened. This requirement comes from Article 54 bis of Federal Decree-Law No. 8 of 2017 on Value Added Tax, which allows the FTA to reject an Input Tax UAE claim where a purchase was connected to tax fraud, including cases where the business did not know about the fraud but should have checked.
That second part is what makes this significant. If a business skips the required checks, the FTA can treat it as though it had all the information those checks would have revealed. The verification records a business keeps are therefore not just paperwork for its own sake; they are the evidence that it took reasonable steps before a claim was made.
What Is FTA Decision No. 13 of 2026, and Why Does It Matter?
Issued on 22 July 2026 and effective from 1 October 2026, FTA Decision No. 13 of 2026 sets out the specific measures, procedures, and conditions that all Taxable Persons must follow.
The legal foundation is Article 54 bis of the UAE VAT Law, and under that provision, the FTA must reject recoverable Input Tax where a supply is connected with Tax Evasion and the individual involved knew, or should have known, about that connection.
What the decision does not do is create an automatic penalty for every gap in a verification file. Its consequences are tied to Article 54 bis, and this means that they become most significant where a supply chain is actually connected with Tax Evasion.
The verification records exist to show what steps have even been taken and whether those steps were reasonable given the circumstances.
Related: VAT Return Filing Services
What Must Businesses Verify Before They Claim Input Tax?
The exact things to do actually divide into two distinct obligations:
- Supplier verification: this is simply to establish that the supplier is a genuine, identifiable business
- Supply verification: this is also to examine whether the actual transaction has real commercial substance
Both matter because a valid tax invoice alone does not prove that the underlying transaction is in fact genuine. Businesses that rely on the invoice as the single evidence without looking at who issued it or what it actually represents are exposed under the new law.
Supplier Verification Requirements
Confirming Supplier Identity. For an individual supplier, businesses must obtain valid means of identification and meet the person before receiving any sort of supplies. That meeting can take place in person or virtually.
For a legal entity, the business should obtain incorporation documents or verify the details of such a company through official databases, and confirm the identity of whoever is authorised to represent the supplier.
Verifying the Place of Business of the Supplier. Having the registered address of a supplier is not the same as knowing they actually operate from it. Businesses must establish that their supplier has an actual place of business, either through electronic verification or a physical visit.
The location should also be credible given what the supplier claims to do. A company that presents itself as a large-scale manufacturer but is unable to demonstrate premises or operations that are supposed to be consistent with that activity raises questions that need to be addressed and recorded.
Prescribed Risk Indicators. FTA Decision No. 13 of 2026 also helps businesses to be able to identify specific warning signs that require assessment. Examples of such signs include:
- A supplier that changes its registered address more than twice in the previous 12 months
- Key personnel that have changed more than twice in that same period
- Transactions that appear disproportionate or unexpected relative to the size and business history of the supplier
A risk indicator does not by itself disqualify a supplier automatically. It signals that the circumstances simply deserve a closer examination and that the business should retain evidence of how it assessed and resolved the concern.
Enhanced Checks for Higher-Value Suppliers. Where supplies from a supplier exceed AED 375,000 in the previous 12 months and are expected to exceed that figure in the following 12 months, then a sort of enhanced supplier verification UAE will apply.
At that level, the business must obtain written confirmation from a UAE-authorised bank that the supplier holds an active account. The business must also review any relevant publicly available information about the supplier, and this will include client reviews, media coverage, and anything else that can help to assess credibility.
Verifying the Supply Itself
Commercial Rationale and Transaction Substance. Every transaction needs a commercial reason that holds up under scrutiny. The business should be able to explain the supplier selection, what changed hands, and why the deal made sense when it was even agreed.
The transaction must have a genuine commercial reason. Any business engaged in a transaction should be able to explain why this supplier was chosen, what was purchased, and why the arrangement made commercial sense at the time.
Specifically, businesses must examine whether:
- Payment conditions are commercially reasonable for the type of transaction
- Price or profit margin is consistent with the nature of the supply
- Stated activities match the goods or services actually provided by the supplier
- Goods are authentic and have a credible, traceable origin
- Supplier actually owns the goods or legitimately holds the right to dispose of them
- Intermediary in the arrangement has a genuine commercial role rather than simply adding a layer to the transaction
Payment Arrangements. Electronic payment is the expected standard under this new law. Where cash is used, a documented commercial reason is required alongside appropriate supporting evidence of payment.
A bank transfer that is backed by a contract, purchase order, delivery record, and invoice tells a clear, verifiable story. A cash payment that has nothing around it tells a different one, and by the time that gap matters, it is rarely possible to fill it.
Need Expert Advice?
Contact the team at Farahat & Co. for professional support and expert insights for businesses operating in the UAE.
How the AED 10,000 and AED 100,000 Thresholds Work
Where even a single supply tends to fall below AED 10,000, excluding VAT, the verification requirements may generally be set aside, but only up to a specific point.
Once additional purchases from the same supplier cross AED 100,000 over a period of 12 months, the exception no longer applies, even for individual invoices that still sit below AED 10,000.
Threshold Summary
| Threshold | What It Means in Practice |
|---|---|
| Below AED 10,000 | Individual supply may fall within the exception |
| AED 100,000 | Supplier-level threshold removes the supply exception |
| Above AED 375,000 | Enhanced supplier verification |
A Practical Example
A business that receives a single AED 5,000 supply; if the total purchases from that supplier stay below AED 100,000 over the relevant periods, the exception may apply, and full verification is not required. However, if there are subsequent purchases that push the total above AED 100,000, the exception no longer applies as it signals that the relationship now warrants full verification going forward.
See also: Tax Agent in Dubai, UAE
What Are the Records and Internal Policy Requirements?
What Records Must Be Retained
Carrying out verification is only half the obligation. The records kept are what allow the FTA to confirm that the right steps were taken, and when.
Relevant records must include:
- Identity documents and incorporation records of the supplier
- Evidence of address verification
- Authorised representative confirmation
- Procedure taken for risk assessments and how each concern was resolved
- Bank confirmation letters for higher-value suppliers
- Public-source research records
- Contracts, purchase orders, delivery records, and payment evidence
The Internal Policy Requirement
Records alone are simply not enough; FTA Decision No. 13 of 2026 also requires that there is a written internal policy that will govern exactly how the verification process will run.
That policy must identify the specific personnel who are responsible for performing, reviewing, and supervising the checks. This will also include the scope of their authority and what happens when an exception or concern comes up.
Pointing generally at “the finance team” does not satisfy this requirement at all. The policy still needs to be able to name specific roles, define who does what at each stage, and establish what happens when something falls outside the normal process.
Also check: VAT Consultants in UAE
What Businesses Should Do Before 1 October 2026
The most practical approach that is available for most businesses is to build the verification process into the already existing purchase-to-pay plan before the effective date, and not treat them as a separate VAT compliance exercise that is bolted on afterward.
Examples of the necessary steps to take before October 2026:
- Review the database of the supplier and identify high-value, recurring, or previously flagged relationships
- Check whether the identity of the supplier and business information on file are complete and current
- Add the prescribed risk indicators to the onboarding process for the supplier and periodic review procedures
- Set up enhanced checks for suppliers that are approaching or exceeding AED 375,000
- Ensure that contracts, pricing justifications, delivery records, and payment evidence are retained systematically
- Draft and implement the required internal verification policy
- Assign clear responsibilities across procurement, accounts payable, finance, and tax functions
- Train staff who are involved in onboarding suppliers or input tax approval on what the new requirements mean in practice
Leaving verification up until the moment when a VAT return is to be made is already too late. The evidence that belonged at the point of transaction is often gone or impossible to find by then.
What This Means for VAT Compliance in the UAE Going Forward
VAT compliance in the UAE has always involved more than simply being able to file accurate returns. The new rule extends that responsibility upstream into procurement and supplier management in a way that requires coordination across multiple business functions.
Supplier onboarding, accounts payable, procurement, and tax teams all have a defined role in the process of verification under the new rules. The internal policy requirement also formalises that each function needs to understand its specific obligations rather than assume someone else is there to handle the checks.
The invoice used to be where the process of verification started, but because of the new rule, it is now where it ends. Everything behind it, that includes the identity of the supplier, the substance of the transaction, and the documented checks of the business, is what actually determines whether the VAT input tax claim will even hold up.
Frequently Asked Questions (FAQs)
What is FTA Decision No. 13 of 2026?
When does FTA Decision No. 13 of 2026 take effect?
Does every supply require verification?
What triggers the enhanced supplier checks?
What supplier risk indicators must businesses assess?
Is a VAT invoice enough to support an Input Tax claim?
Will incomplete verification automatically invalidate a VAT Input Tax claim?
What should businesses prioritise before October 2026?
Need Expert Advice?
Contact the team at Farahat & Co. for professional support and expert insights for businesses operating in the UAE.
How Farahat & Co. Can Help
Farahat & Co. helps businesses build and document a supplier and supply verification process that meets FTA Decision No. 13 of 2026, including reviewing existing supplier records, drafting the required internal verification policy, and preparing procurement and finance teams for the 1 October 2026 effective date.
Contact Farahat & Co. today to discuss your VAT input tax verification requirements.
