Federal Tax Authority in the UAE Sets Out New Due Diligence Rules for Input VAT Recovery

Created On: September 10, 2026
Newsletter, U.A.E.

Modified On: September 10, 2026

Share

Summary:

Effective October 1, 2026, UAE FTA Decision No. 13 of 2026 establishes mandatory due diligence rules for businesses claiming input VAT recovery. To safeguard tax deductions from evasion risks, companies must thoroughly verify supplier identities, physical locations, and the commercial rationale of individual transactions. Enhanced verification—including bank account and background checks—is required for suppliers exceeding AED 375,000 in transactions or annual spends over AED 100,000. Organizations must maintain documented verification policies and clear staff oversight across procurement and finance departments. Businesses must audit and adapt their onboarding workflows before the October 1 deadline to prevent rejected VAT claims.

The UAE Federal Tax Authority has issued Decision No. 13 of 2026, setting out new verification requirements that businesses must before deducting input VAT. Issued on July 22, 2026, the decision takes effect from October 1 and puts Article 54 bis of the UAE VAT Law into practical terms.

If a supply is connected to tax evasion and the business knew, or should have known, about it, the FTA can reject the input VAT recovery under the new rules. The decision sets out the verification requirements businesses are expected to complete, from validating the details of their suppliers and business activity to reviewing transaction terms and potential risk indicators.

Forward-thinking businesses would be seeking due diligence services in Dubai to understand what “should have known” means in day-to-day business. The priority lies not simply on what a company intended to do, but on whether reasonable verification was actually carried out.

The Supplier Checks Businesses Need to Complete

The decision requires businesses to confirm the identity of their suppliers. This includes identification documents for individuals and incorporation details for entities, along with authorized representatives and whether the stated business location of a supplier matches its actual activity.

Risk indicators have been pointed out explicitly. These include frequent changes in the address of the supplier or key personnel, and transactions that look inconsistent with the normal business profile of a supplier. In scenarios where a supplier’s transactions exceed AED 375,000 in a 12-month period, businesses must additionally verify their bank account in the UAE and review publicly available information, including media coverage, for red flags.

What Needs to Be Checked for Each Transaction

The verification process doesn’t stop at the supplier. Businesses must also assess whether each transaction has a genuine commercial basis, whether payment terms are commercially justifiable, and whether the pricing lies within a reasonable market range.

Extra scrutiny is needed for transactions involving third-party payments, foreign bank accounts, or cash. Businesses must work consistently with an established VAT consultant in Dubai to build these checks into procurement and finance workflows rather than treating them as a one-time review.

Keeping the Verification Process Documented

The decision requires documented verification procedures and retained supporting records, along with written policies naming the people responsible for implementing, reviewing, and supervising the process. There is an exemption for supplies under AED 10,000, but it disappears once total annual purchases from a single supplier cross AED 100,000. This means most ongoing supplier relationships will fall under the full set of due diligence and verification requirements, regardless of the size of individual invoices.

What Businesses Should Do Before October 1

With just weeks before the decision comes into effect, businesses should be reviewing procurement, supplier onboarding, finance, and governance processes now, instead of waiting for the first refund request to expose a gap. IMC works with businesses in the UAE to review their supplier and transaction controls against the requirements of Decision No. 13 and address any documentation gaps before they affect a VAT claim. Consult our advisory team to review your current VAT processes and prepare for the new requirements before October 1.

This newsletter is for general informational purposes only and does not constitute legal or tax advice. FTA requirements in the UAE should be verified with a qualified advisor before action.

Author Bio:

Krizelle Zara Briones delivers precise, hands-on expertise across business accounting, tax, and audit compliance. She simplifies complex regulatory requirements, allowing clients to move forward with clarity and strategic confidence.

Expand your business faster with our Global Capability Center

Global Entity Management is more than compliance

Let’s build the full structure right