FTA Decision No. 13 of 2026: What Businesses Must Verify Before Deducting Input Tax

Recovering input VAT may no longer be treated primarily as an invoice-checking exercise. Federal Tax Authority Decision No. 13 of 2026, issued on 22 July 2026 and effective from 1 October 2026, establishes measures, procedures and conditions that taxable persons must follow to verify the validity and integrity of supplies before deducting the related input tax.

The Decision applies for the purposes of Article 54 bis of the UAE VAT Law. Its practical significance is that businesses should be prepared to show appropriate checks on the supplier, the commercial basis of the transaction, the payment arrangements, the nature of the supply and the evidence retained.

• The identity and business presence of the supplier.
• The supplier's risk profile.
• The commercial basis of the transaction.
• The payment method and recipient.
• The nature, price and authenticity of the supply.
• The evidence retained to support those checks.

The key change: verification before deduction

The Decision creates two connected layers of verification. Supplier-level verification establishes who the supplier is and whether its business profile appears consistent with the proposed activity. Supply-level verification assesses each taxable supply and the commercial circumstances surrounding it.

Completing supplier onboarding once may not be sufficient. While supplier verification is periodic, each taxable supply received or accepted must be assessed under the relevant supply-verification conditions.

1. Verifying the supplier's identity

Where the supplier is a natural person

• Obtain a copy of valid identification, including an Emirates ID or passport.
• Meet the supplier, either in person or virtually, before the supply takes place.

The business should document when the meeting took place, who attended and how the supplier's identity was confirmed.

Where the supplier is a legal person

• Verify the supplier's incorporation through official databases or obtain its certificate of incorporation.
• Check that the incorporation information is valid and consistent with the supplier's name, address, employees and other relevant information.
• Verify the identity of the director, agent or employee authorised to represent the supplier.

2. Confirming the supplier's place of business

A taxable person must verify that the supplier has an actual place of business. This can be performed using appropriate electronic methods or by conducting a physical visit. The place of business should also be reasonably compatible with the supplier's activities.

The location and apparent operating capacity should make commercial sense when considered alongside the supplier's licensed activities, the transaction volume, the goods or services offered and the supplier's apparent operational resources.

3. Identifying supplier risk indicators

The Decision identifies three specific supplier risk indicators:

• The supplier changed its address more than twice during the previous 12 months.
• The supplier changed key employees more than twice during the previous 12 months.
• The supplier conducted transactions that appear disproportionate or unexpected in volume, value or nature when compared with its business size and operating history.

The existence of an indicator does not necessarily mean that the supplier or supply is invalid. However, where an indicator applies, the taxable person must retain a clear and justified explanation that can be supplied to the FTA upon request and does not conflict with other available information.

4. Enhanced checks above AED 375,000

Additional checks apply where supplies received from a supplier exceed AED 375,000 during the previous 12 months, or are expected to exceed that amount during the next 12 months.

• Obtain written confirmation from an authorised UAE bank that the supplier has a bank account.
• Ensure the confirmation does not contain relevant reservations or conditions. It does not need to be addressed specifically to the recipient.
• Review reliable publicly available recommendations, reviews and media coverage for consistency with the supplier's business and indicators of suspected tax evasion.

Businesses therefore need a reliable way to monitor both cumulative supplier expenditure and purchases expected over the next 12 months.

5. Assessing the commercial substance of each supply

Each taxable supply received or accepted must be considered in its commercial context. The taxable person should assess:

• Whether the transaction has genuine commercial reasons.
• Whether the payment terms are commercially justifiable.
• Whether any third party participates in making or receiving payment.
• Whether payment is made to a bank account outside the supplier's country of incorporation.
• Whether the price or profit margin is commercially reasonable.
• Whether the goods or services align with the supplier's ordinary or licensed activities.
• For goods, their authenticity and origin, and whether the supplier owns them or has the right to dispose of them.
• Whether there is a clear commercial justification for any intermediary.

6. Reviewing payment arrangements

Consideration should be paid electronically. Where payment is made in cash, it must have a documented commercial reason, remain within applicable tax-law thresholds and be readily verifiable.

Particular attention is required when the payment recipient differs from the contracted supplier, a third party is involved, an overseas bank account is used or the actual payment method differs from the agreed method. The business should retain a reasonable commercial explanation consistent with the available evidence.

7. Verifying prices, activities and goods

A difference from market pricing does not automatically invalidate a transaction. Urgent delivery, special specifications, volume discounts, long-term arrangements, specialist knowledge or limited availability may provide legitimate explanations. Where pricing appears unusual, the explanation should be identified and documented.

The business must also consider whether goods or services fall outside the supplier's ordinary or licensed activities. For goods, it should assess authenticity, origin and whether the supplier owns or has the right to dispose of them.

8. How often must supplier verification be performed?

• When dealing with a supplier for the first time.
• During recurring dealings where the supplier has not been verified within the preceding 12 months.
• At supply level, for each taxable supply received or accepted.

A practical control framework should therefore include both periodic supplier due diligence and transaction-level verification.

9. Documentation and accountability

The taxable person must document the verification steps taken and retain supporting documents and records. These records should enable the FTA to verify whether the requirements were correctly implemented.

Businesses must also maintain a documented policy identifying who performs, reviews and supervises verification; the responsibilities and authority of each person; who can approve exceptions; and where supporting records are retained.

10. The AED 10,000 exception

A taxable person may disregard the prescribed measures and conditions for a taxable supply where the consideration, excluding VAT, is below AED 10,000.

The exception is not available where total supplies received from the same supplier exceeded AED 100,000 during the preceding 12 months, or are expected to exceed AED 100,000 during the next 12 months. An invoice should therefore not be assessed in isolation.

Summary of the important thresholds

What businesses should do before 1 October 2026

• Review supplier master records for legal identity, incorporation evidence, authorised representatives, business address, licensed activities, bank details and the most recent verification date.
• Segment suppliers by the AED 10,000, AED 100,000 and AED 375,000 thresholds, considering both historical and expected purchasing.
• Develop a supplier-verification checklist that records checks, evidence, exceptions, approvals and the next review date.
• Strengthen transaction approvals so the commercial reason, delivery evidence, pricing, payment recipient and any intermediary are clear.
• Create an escalation process for unusual pricing, payment arrangements, supplier changes or inconsistent documentation.
• Formally assign responsibility for performing, reviewing and supervising the verification process.

A practical supplier-verification file

A structured supplier-verification file could include:

• Supplier onboarding form and incorporation or identity evidence.
• Authorised representative information.
• Business-address and licensed-activity verification.
• Risk-indicator assessment.
• Bank confirmation and public-source review, where applicable.
• Commercial explanations for identified exceptions.
• Reviewer approval and verification date.
• Contract, purchase order, invoice and evidence of receipt.
• Payment evidence and explanations for intermediaries or third-party payments.

Why finance and procurement must work together

The accounts team may hold the invoice and payment record but may not know why the supplier was selected, what was delivered, whether the price was reasonable or why an intermediary was involved. Procurement and operational teams may hold that information without understanding its importance for input tax recovery.

An effective process should connect supplier onboarding, purchase approval, receipt confirmation, payment processing and VAT return preparation.

Final perspective

FTA Decision No. 13 of 2026 introduces a more structured approach to verifying suppliers and supplies before input tax is deducted. The most important preparation is not simply collecting more documents. It is creating a defensible process connecting supplier identity, commercial purpose, transaction evidence, payment information, risk assessment, approval and record retention.

Businesses that review their supplier and procurement processes before 1 October 2026 will have more time to identify missing information, assign responsibilities and resolve unusual arrangements.