Why this decision matters
Starting 1 October 2026, claiming input VAT in the UAE will require more than a valid tax invoice. Federal Tax Authority Decision No. 13 of 2026, on the validity and integrity of supplies before deduction of input tax, introduces a formal obligation for businesses to verify that their suppliers and purchases are genuine before they deduct input VAT.
Input VAT has traditionally been treated as a documentation exercise: hold a valid tax invoice, and the deduction is defensible. This decision changes that assumption. It requires taxable persons to check the supplier, the supply itself, the payment conditions, and the records kept, with the stated goal of preventing tax evasion and protecting businesses when the FTA asks for evidence. In short, the invoice on its own is no longer enough.
For any business that regularly purchases goods or services in the UAE, this is a compliance shift worth planning for now, not in September.
The four questions to ask before claiming input VAT
The decision can be summarised around four checkpoints that should apply to every material supplier relationship and every taxable supply:
- Is the supplier real? Identity, legal status and address.
- Is the supplier low risk? Are there red flags, and can they be explained?
- Is the supply genuine? Business reason, payment, price and activity.
- Can we prove it later? Evidence, policy and retained records.
Verifying the supplier's identity (Article 3)
Before dealing with a supplier, a business needs to confirm it is real and operating.
- Individual suppliers: keep a valid Emirates ID or passport copy, and meet the supplier in person or virtually before the supply takes place.
- Company suppliers: verify incorporation through official databases or incorporation documents, and identify the authorised director, agent or employee you are dealing with.
- Business address and activity: use suitable electronic checks or a physical visit. The location should make sense for the supplier's stated business activity.
Watching for supplier risk flags
Red flags do not automatically block a purchase, but they do require a documented explanation. Within the FTA's decision, the following are flagged as warranting attention over a 12 month period:
- The supplier's address has changed more than twice
- Key contacts have changed more than twice
- Transactions look unexpected for the supplier's size or history
If any of these apply, the business should write a clear reason, keep supporting evidence, and be ready to present it to the FTA on request.
The AED 375,000 threshold: extra checks for larger relationships
Where supplies from a single supplier exceeded AED 375,000 in the last 12 months, or are expected to exceed it in the next 12 months, two additional checks apply:
- Bank account confirmation: written confirmation from an authorised UAE bank that the supplier holds an account, free of any relevant reservation or condition.
- Reputation check: a review of reliable public information and media coverage, consistent with the supplier's size and business, showing no indicators of suspected tax evasion.
Checking the supply itself (Article 4)
Beyond the supplier, the decision also expects the supply to make commercial sense.
- Commercial reason: why this supplier, and why does the purchase make business sense?
- Payment route: electronic payment is the expectation. If a third party is paying or receiving funds, or payment moves outside the supplier's country of incorporation, a reasonable commercial explanation should be documented.
- Cash payments: treated as exceptional, requiring a documented commercial reason, compliance with applicable tax law limits, and easy verifiability.
Good supporting evidence typically combines a purchase order, contract, invoice, bank transfer record, and proof of delivery or service.
The decision also expects the underlying commercial facts to hold up to scrutiny:
- Price and margin: a price far from market value needs strong supporting evidence, for example a laptop offered at AED 100 against a market price of AED 3,000.
- Supplier activity: goods or services sold should fit the supplier's ordinary trade licence and activity. A marketing agency selling gold bars would be a warning sign.
- Goods and ownership: authenticity, origin, and the supplier's right to sell should be confirmed, supported by serial numbers, delivery notes, import documents or ownership evidence.
Intermediaries are fine, if they add real value
Using an intermediary or distributor in a supply chain is permitted under the decision, provided the intermediary has a genuine commercial role, such as holding inventory, providing warranty support, or handling local delivery, rather than being a name inserted into the chain without purpose. Keeping the distribution agreement, goods trail and invoice chain on file supports this.
Building a repeatable verification process (Article 5)
The decision expects businesses to embed this verification into an ongoing process, not a one time check:
- Verify a supplier before the first dealing
- Re-verify a recurring supplier if it has not been checked in the previous 12 months
- Check the supply, payment and commercial facts for each taxable supply
- Retain evidence, along with a documented policy
That policy should clearly name who performs, reviews and supervises these checks, along with their responsibilities and authority.
A limited exception for small purchases (Article 6)
Not every transaction requires the full verification process. The exception applies where a supply's value, excluding VAT, is below AED 10,000, for example a AED 7,000 repair service, provided the supplier's total stays below the next threshold.
However, this exception disappears once total supplies from that supplier exceed, or are expected to exceed, AED 100,000 within a 12 month period. Twelve purchases of AED 9,000 each add up to AED 108,000, which triggers the full verification requirement. The assessment must always look at the supplier relationship over 12 months, not a single invoice in isolation.
Getting ready before 1 October 2026
The most practical step a business can take now is to build a simple evidence file for each supplier and each significant supply.
Supplier file
- Supplier ID and incorporation check
- Authorised contact identification
- Address and business activity evidence
- Risk screen and explanation, if applicable
- Bank confirmation and public reputation check where the AED 375,000 test is met
Supply file
- Commercial reason and purchase approval
- Contract, purchase order and tax invoice
- Electronic payment evidence
- Delivery, service, origin or ownership evidence
- 12 month review date and responsible person
The key takeaway: if a business cannot explain the supplier, the commercial purpose, the payment and the supporting evidence, it should pause before deducting the related input VAT.
