UAE Input VAT Rules Are Changing: Supplier Due Diligence Required from 1 October 2026
Recovering input VAT in the UAE will soon require more than holding a valid tax invoice.
From 1 October 2026, businesses must perform and document specific checks on their suppliers and transactions before deducting input VAT. The new requirements are set out in Federal Tax Authority Decision No. 13 of 2026, issued to support Article 54 bis of the UAE VAT Law.
Under the new framework, the Federal Tax Authority may deny an input VAT deduction where a supply—or any part of its supply chain—is connected to tax evasion and the taxable person knew, or should have known, about that connection. A business that fails to complete the required verification procedures may be treated as having been aware of the risk.
This represents an important change in UAE VAT compliance. Businesses must now demonstrate not only that a purchase occurred, but also that reasonable checks were performed on the supplier and the commercial substance of the transaction.
What must businesses verify?
The decision introduces checks covering both the supplier and the individual supply.
1. Supplier identity and legal existence
For individual suppliers, businesses must obtain valid identification documents and meet the supplier physically or virtually before the transaction.
For corporate suppliers, businesses should verify their establishment through official databases or obtain valid incorporation documents. The identity and authority of the manager, agent or employee representing the supplier must also be checked.
2. Supplier’s business location
Businesses must confirm that the supplier has an actual place of business and that the location is appropriate for the activities it claims to perform. Verification may be completed electronically or through a physical visit.
3. Supplier risk indicators
Businesses must review whether the supplier presents warning signs, such as:
- Frequent changes in business address
- Repeated changes in directors or key employees
- Transactions inconsistent with the supplier’s size, history or normal business activities
- Unusual transaction values or volumes
Where a warning sign exists, the business must retain a clear explanation and supporting evidence showing why it proceeded with the supplier.
4. Additional checks for larger suppliers
Where supplies received from a supplier exceed, or are expected to exceed, AED 375,000 during a 12-month period, additional verification is required.
This includes confirming that the supplier holds a bank account with a bank in the UAE and reviewing reliable public information, customer feedback and media coverage for possible indicators of tax evasion.
Transaction-level verification
Businesses must also review each taxable supply before claiming UAE input VAT.
The checks should confirm that:
- The transaction has a genuine commercial purpose.
- The supplier’s involvement is commercially reasonable.
- Payment methods and terms can be properly explained.
- Third-party payments or payments to foreign bank accounts have a valid commercial justification.
- Cash payments are supported by a documented business reason and comply with applicable tax requirements.
- Pricing and profit margins are not materially inconsistent with market conditions without explanation.
- The goods or services fall within the supplier’s licensed business activities.
- The authenticity, origin and ownership of goods can be established.
- Any intermediary involved in the supply chain has a clearly documented commercial role.
A tax invoice alone may therefore no longer be sufficient to protect an input VAT claim where the surrounding supplier or transaction details raise concerns.
Documentation and accountability are essential
Businesses must document the verification steps performed and retain the supporting records. The FTA must be able to review the evidence and confirm that the required procedures were properly completed.
Companies must also maintain a written policy identifying:
- Who performs supplier and transaction checks
- Who reviews the verification
- Who supervises the process
- The responsibilities and authority of each person
- Where the supporting documents are retained
This means supplier due diligence can no longer remain an informal responsibility shared between procurement, finance and accounts payable. Clear ownership and oversight must be established.
Are smaller transactions excluded?
A limited exception is available where the value of an individual taxable supply, excluding VAT, is below AED 10,000.
However, the exception will not apply where the total supplies received from the same supplier exceed, or are expected to exceed, AED 100,000 during a 12-month period.
Businesses should therefore monitor cumulative supplier spending rather than assessing invoices individually.
What should UAE businesses do before 1 October?
Businesses should use the period before implementation of UAE Input VAT Rules to strengthen their supplier onboarding, procurement and accounts payable controls.
Key actions include:
- Review the existing supplier master data and identify missing documents.
- Classify suppliers according to transaction value and risk.
- Introduce a standard supplier due-diligence checklist.
- Verify trade licences, incorporation details, authorised representatives and business locations.
- Review unusual pricing, payment arrangements and third-party involvement.
- Establish enhanced checks for suppliers crossing the AED 375,000 threshold.
- Monitor cumulative transactions for the AED 100,000 exception limit.
- Document the employees responsible for performing, reviewing and supervising the checks.
- Create a central and audit-ready repository for supporting evidence.
- Train procurement, finance, tax and accounts payable teams before the effective date.
Why this change matters
The new decision expands VAT compliance beyond the finance and tax departments. Procurement teams, vendor-management teams and employees approving purchases will also play an important role in protecting the company’s input VAT recovery.
Businesses that continue relying only on tax invoices, TRN verification and payment records could face challenges if they cannot demonstrate that the supplier and transaction were properly reviewed.
The practical message is clear: input VAT recovery is becoming dependent on documented supplier and transaction integrity, not documentation alone.
How Tass & Hamjit can assist
Tass & Hamjit can support UAE businesses in assessing their readiness for the new requirements by reviewing supplier onboarding, procurement, accounts payable and VAT-control processes.
Our team can assist with:
- Assessing VAT compliance and supplier-verification gaps
- Developing risk-based supplier due-diligence frameworks
- Preparing verification checklists, SOPs and supporting documentation
- Strengthening procurement and accounts payable controls
- Updating VAT policies and operating procedures
- Defining responsibility, review and approval matrices
- Training procurement, finance and accounts payable teams
- Establishing audit-ready documentation and record-retention processes
- Implementing technology-enabled verification workflows through THAT
With the UAE Input VAT rules becoming effective on 1 October 2026, businesses should begin reviewing their supplier and transaction controls now.
Stay compliant. Stay ahead.
For assistance, contact Tass & Hamjit:
Email: uae@tasshamjit.com
Phone: +971 54 581 3655
This article is intended for general informational purposes and should not be considered tax or legal advice. The application of the decision may vary depending on the facts and circumstances of each business.
The article is based primarily on the official FTA Decision No. 13 of 2026, supported by the UAE Ministry of Finance’s explanation of Article 54 bis and EY’s technical summary.
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