Know Your Supplier and the Supplies Received Before Claiming Input VAT

For many businesses, recovering Input VAT has traditionally started with the tax invoice: is the invoice valid, is the VAT correctly charged, and does the expense relate to the business?

From 1 October 2026, that is no longer the whole picture.

FTA Decision No. 13 of 2026 sets out the measures, procedures and conditions for the verification of the validity and integrity of supplies before deduction of Input Tax.

In practice, this means looking at both the supplier and the supply received. Supplier onboarding, procurement, payment arrangements, record keeping and VAT procedures can therefore all become relevant to the Input VAT position.

Why Has This Been Introduced?

Article 54(bis) of the UAE VAT Law provides the legal background to these verification requirements.

It deals with the deduction of Recoverable Input Tax where a supply, or a chain of supplies, is connected with Tax Evasion.

Where the Taxable Person Was Aware

Where the FTA establishes that the relevant supply was part of a supply or chain of supplies related to Tax Evasion and the Taxable Person was aware of that connection, the FTA shall reject the deduction of the Recoverable Input Tax.

Where the Taxable Person Should Have Been Aware

The FTA may also reject the deduction where, based on the circumstances of the supply, the Taxable Person should have been aware of that connection.

Importantly, for the “should have been aware” test, where the prescribed verification of the validity and integrity of the supplies was not performed, the Taxable Person may be treated as having been required to be aware of the connection.

FTA Decision No. 13 of 2026 comes into the picture by setting out the measures, procedures and conditions for that verification.

What Should You Know About Your Supplier?

The first level of verification focuses on the supplier itself.

Verify the Supplier's Identity

Where the supplier is a natural person, the Taxable Person must obtain a copy of valid proof of identity, including an Emirates ID or passport, and meet the supplier, whether in person or virtually, before the supply is made.

Where the supplier is a legal person, its incorporation must be verified through official databases or by obtaining the relevant certificate of incorporation.

The incorporation details should be valid and consistent with the entity's name, address, employees and other related information. The identity of the director, agent or employee authorised to represent the supplier must also be verified through valid proof of identity.

Verify the Address and Actual Place of Business

Businesses must verify that the supplier has an actual place of business. This can be done using appropriate electronic means or through a field visit to the supplier's place of business.

The place of business should also be compatible with the nature of the activities carried out by the supplier.

Check the Supplier Risk Indicators

The Decision identifies specific risk indicators, including where the supplier:

• has changed its address more than twice over the previous 12 months
• has changed key employees, including managers or the persons dealing with the business, more than twice over the previous 12 months
• has undertaken transactions that are disproportionate or unexpected in volume, value or nature compared with the size and history of the supplier's business

The presence of a risk indicator does not by itself mean that Tax Evasion has occurred. However, where an indicator applies, the Taxable Person must retain a clear and justified explanation and be able to submit it to the FTA if requested.

The explanation should not contradict the evidence or information available to the Taxable Person.

Additional Checks for Larger Supplier Relationships

Additional verification applies where the value of supplies received from a supplier:

• exceeds AED 375,000 over the previous 12 months; or
• is expected to exceed AED 375,000 over the next 12 months.

In these cases, the Taxable Person must obtain from the supplier written confirmation issued by an authorised bank in the UAE confirming that the supplier has a bank account.

The confirmation should not contain any relevant reservations or conditions.

Businesses must also review and assess publicly available reviews and media coverage relating to the supplier from reliable sources. The information should be consistent with the nature and size of the supplier's business and should not indicate suspected Tax Evasion.

Knowing the Supplier Is Only Half of the Exercise

A genuine supplier does not automatically mean that every transaction with that supplier should be accepted without question.

The Decision separately requires verification of the supplies received.

Does the Transaction Have a Genuine Commercial Reason?

Businesses must conduct a general assessment of the conditions surrounding the transaction and ensure that the supplier's involvement in the transaction is based on genuine commercial reasons.

Do the Payment Arrangements Make Sense?

The payment method and conditions should be justifiable for commercial reasons.

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, there must be a reasonable commercial explanation that does not contradict the information or evidence available to the Taxable Person.

Importantly, the Decision states that the Consideration for the supply shall be paid by electronic means.

Where payment is made in cash, it must be based on a documented commercial reason, be within the thresholds specified in the applicable Tax legislation and be easily verifiable.

Do the Wider Circumstances of the Supply Make Sense?

The verification also extends to the wider circumstances of the supply. Businesses need to verify that:

• prices or profit margins are not commercially unjustifiable or significantly different from market conditions without a clear reason
• the Goods or Services do not fall outside the supplier's ordinary activity or the activities the supplier is licensed to carry out
• where Goods are involved, their authenticity and origin are verified, together with the validity of the supplier's ownership of the Goods or right to dispose of them
• where the supplier acts as an intermediary, there is a clear and justifiable commercial explanation for the supplier's role in the supply

Three Numbers Businesses Should Remember

The Decision contains three important thresholds that finance and procurement teams should build into their procedures.

This is important because a business should not look at each invoice in isolation. Several smaller supplies from the same supplier can still take the supplier relationship above the relevant threshold.

How Often Should the Verification Be Performed?

The Decision distinguishes between verification of the supplier and verification of the supply.

A supplier must be verified when:

• dealing with the supplier for the first time; or
• there are recurrent dealings and the supplier has not been verified over the previous 12 months.

Separately, the Taxable Person must verify each Taxable Supply received or accepted in accordance with the supply-verification requirements.

Document the Checks and Keep the Evidence

Performing the verification is only part of the requirement. Businesses also need to be able to demonstrate what they did.

The Decision requires Taxable Persons to document the verification steps taken and retain supporting documents and records so that the FTA can verify the correctness of their implementation.

A documented policy must also identify the persons responsible for implementing, reviewing and supervising the verification procedures, together with their powers and responsibilities.

The policy and supporting records should also be retained at the designated location for keeping the required documents.

Depending on the business, this may involve Procurement, Operations, Accounts Payable, Treasury, Finance and Tax rather than only the person preparing the VAT return.

What Should UAE Businesses Do Before 1 October 2026?

This should not be left until the next VAT return is being prepared. By then, some of the required information or evidence may already be difficult to obtain.

1. Review the Existing Supplier Base

Identify active and recurring suppliers, suppliers that have not been verified over the previous 12 months, and suppliers approaching the AED 100,000 or AED 375,000 thresholds.

2. Update Supplier Onboarding and Re-verification

Compare the checks currently performed when creating or reviewing a supplier against the new verification requirements. Recording the last verification date for recurring suppliers can help identify when re-verification is required.

3. Build the Thresholds into the Process

The AED 10,000, AED 100,000 and AED 375,000 tests should not depend on someone remembering them manually when an invoice arrives.

Because the Decision looks at both the previous and next 12 months, these controls should not simply reset at the financial or calendar year-end.

4. Review Payment Controls

Ensure that the Consideration is paid by electronic means and put controls around cash payments, third-party payments and payments to bank accounts outside the supplier's country of incorporation.

Where a commercial explanation is required, it should be documented and retained.

5. Connect the Relevant Business Functions

The person preparing the VAT return may not have enough information to perform all of these checks alone. Procurement, Operations, Accounts Payable, Treasury, Finance and Tax may all need to play a role.

6. Put the Process in Writing

Define who implements, reviews and supervises the verification, their powers and responsibilities, what supporting evidence is retained, and where the policy and records are kept.

The objective is not to create unnecessary paperwork. It is to make the required verification part of the normal purchase-to-payment process.

A Practical Example

Consider a business that has dealt with the same supplier for several years.

The supplier has always issued proper tax invoices and the business has always paid them through its normal accounting process.

From 1 October 2026, the business should not simply assume that the historical relationship is enough. It should consider whether the supplier has been verified over the previous 12 months, whether the supplier's identity and place of business remain properly verified, whether the relevant thresholds apply, and whether each supply and its payment arrangements satisfy the required verification.

For many businesses, this means an existing supplier master file may need more than a trade licence and TRN.

FinVerse Perspective

The objective is not to turn every purchase into an open-ended investigation.

It is to build the prescribed verification into the normal business process in a structured and documented way, so the required checks happen at the right time and the supporting evidence is available when needed.

For many businesses, the real change is that an important part of VAT compliance now moves further upstream — into supplier onboarding, procurement, receipt or acceptance of Goods and Services, payment controls and the wider purchase-to-payment process.

The VAT return is ultimately where the business relies on all of that work when deducting the Input Tax.

The important point is to establish the process before 1 October 2026, rather than trying to reconstruct the evidence after an FTA query.

How FinVerse Can Support

FinVerse can support UAE businesses in assessing and preparing for the new requirements, including:

• reviewing existing supplier onboarding and verification procedures
• mapping FTA Decision No. 13 of 2026 against current procurement, Accounts Payable, payment and VAT controls
• identifying gaps in verification and supporting documentation
• assisting with development of the required documented verification policy
• reviewing unusual supplier, transaction or payment arrangements from a UAE VAT perspective
• supporting implementation of practical supplier and supply-verification controls

Businesses requiring support may also review our VAT Advisory & Compliance services and Tax Agent Services & FTA Representation .

Final Takeaway

From 1 October 2026, businesses deducting Input VAT should be able to answer three straightforward questions:

That is the practical direction of FTA Decision No. 13 of 2026.

For many businesses, the best place to start is not the VAT return. It is the supplier onboarding and purchase-to-payment process.