If your business is registered for VAT in the UAE and you claim input tax on supplies from third-party suppliers, a significant compliance change is coming on October 1, 2026. FTA Decision No. 13 of 2026, issued on July 22, 2026, requires you to verify both the identity of your suppliers and the integrity of the supplies you receive before deducting input VAT on them. Holding a valid tax invoice is no longer sufficient on its own. You need documented evidence that you checked. Businesses that fail to implement these processes before October 1 face the prospect of the FTA denying input tax recovery on affected purchases, at a time when UAE tax enforcement capacity has grown sharply.
The decision applies to all supplies on which you claim UAE input tax — regardless of where the supplier is located. It is not limited to UAE-registered suppliers. If you receive a supply from an overseas company and claim UAE input tax on it, the verification requirement applies. For foreign legal entities, the decision requires you to verify incorporation through official databases or obtain a certificate of incorporation, and to verify the identity of the authorised representative. For UAE-registered suppliers the trade licence and FTA VAT registration are the primary verification documents. The rules are the same framework; the documents you collect differ by supplier location.
FTA Decision No. 13 of 2026 takes effect on October 1, 2026. Any supplies received on or after that date where input tax is claimed must be supported by documented verification of both the supplier and the supply. There is no transitional period and no grace extension has been announced.
The Legal Background: Article 54(bis) and Why This Was Introduced
FTA Decision No. 13 of 2026 · Article 54(bis) VAT Law · effective 1 October 2026
The foundation of the new rules is Article 54(bis) of the UAE VAT Law, inserted by Federal Decree-Law No. 16 of 2025. This provision gives the FTA the power to deny input tax recovery where a supply forms part of a chain of supplies connected to tax evasion, and the recipient of the supply knew or should have known of that connection.
Three triggers exist under Article 54(bis). If a business actually knew its supply was connected to tax evasion, denial of input tax is mandatory. If it should have known based on the circumstances, denial is discretionary. The third trigger is the most consequential for day-to-day compliance: a business is deemed to have been required to know if it failed to carry out the verification measures set out in FTA Decision No. 13 of 2026. Failing to run the checks removes the ability to claim ignorance. As Khaleej Times noted, the third clause is the key one — and it applies regardless of whether any actual fraud existed in the chain.
The decision was introduced in the context of a broader UAE enforcement tightening. The FTA conducted over 103,000 inspection visits in the first half of 2026, up 21% year on year, and the 2026 penalty framework under Cabinet Decision No. 129 of 2025 now applies late payment penalties at 14% per annum.
Part 1: Verifying the Supplier
First transaction + every 12 months · enhanced checks above AED 375,000
The first part of the framework requires verifying who your supplier actually is before claiming input tax from them. Verification must take place at the first transaction with a supplier, and again whenever more than 12 months have passed since the last check.
For suppliers that are legal entities (companies), you must obtain and retain a copy of the valid UAE trade licence, proof of VAT registration from the FTA portal, the identity of the authorised representative, and evidence of the supplier's actual business premises. You must meet the authorised representative either physically or via a verified virtual meeting before placing reliance on the supplier relationship.
For suppliers that are natural persons, you must obtain a copy of their valid Emirates ID or passport and meet them physically or virtually. The meeting requirement is not optional and is specifically listed in the decision text.
For suppliers whose annual supplies to you exceed AED 375,000, enhanced checks apply. These include obtaining a bank confirmation letter (confirming the bank account details match the entity you believe you are dealing with) and carrying out media and risk screening for indicators of tax evasion or financial crime. This enhanced tier is specifically designed to target the higher-risk, higher-value supplier relationships where carousel fraud and supply chain manipulation are most commonly observed.
Part 2: Verifying the Supply
Beyond verifying who the supplier is, you must also assess each supply before deducting input tax on it. The supply-level checks require you to satisfy yourself that the invoice is genuine, that the goods or services were actually delivered or performed, that the transaction has real commercial justification, that the pricing and margins are consistent with normal market conditions, and that the supplier's activities are consistent with their licensed trade activities.
You must also assess that payment terms and methods are commercially normal and that the supply is not structured in a way that is inconsistent with ordinary business practice. The decision specifically flags transactions with unusual pricing, payment to third parties, unexplained changes in supplier information, and transactions that do not fit the supplier's known activities as red flags requiring escalation before input tax is claimed.
The most important conceptual shift in FTA Decision No. 13 of 2026 is this: possession of a formally valid VAT invoice is no longer the only control supporting input VAT recovery. As VATupdate's analysis confirms, you must be able to demonstrate that the supplier and supply were reviewed in accordance with the Decision. The invoice supports the claim. The verification process justifies it.
The Thresholds — When Checks Can Be Reduced
| Scenario | Verification required? | Level |
|---|---|---|
| Single supply below AED 10,000 (excl. VAT) | Waived — with conditions | No checks needed unless annual threshold is exceeded |
| Supplier total annual supplies between AED 10,000 and AED 375,000 | Yes — standard checks | Trade licence, VAT registration, ID, premises, meeting |
| Supplier total annual supplies above AED 375,000 | Yes — enhanced checks | Standard checks plus bank confirmation letter plus media and risk screening |
| Supplier total annual supplies exceed AED 100,000 (even if per-supply below AED 10,000) | Yes — standard checks apply | AED 10,000 per-supply waiver is lost once annual total exceeds AED 100,000 |
| Supplier not verified in last 12 months | Yes — must re-verify | Full re-verification before next input tax claim |
The AED 10,000 per-supply waiver is a practical concession for low-value transactions, but it has a significant catch most businesses miss. If your total purchases from a supplier exceed AED 100,000 in the trailing or anticipated 12 months, the per-supply waiver disappears entirely for that supplier regardless of individual invoice amounts. A supplier from whom you buy AED 8,000 of goods twenty times a year falls squarely into the standard verification requirement once annual purchases pass AED 100,000.
Documentation and Record-Keeping
Documented records required · retained for FTA audit · verbal checks not sufficient
Every check carried out under FTA Decision No. 13 of 2026 must be documented and retained. The FTA retains the right to request this evidence during an audit, and the absence of records will be treated as equivalent to the checks not having been carried out. Verbal verification, memory of having met a supplier, or a general policy statement are not sufficient.
Practically, this means building a supplier verification file for each vendor in your system that contains: the verified trade licence copy with expiry date, the FTA VAT registration confirmation, the authorised representative's identity document, the meeting record, and for the enhanced tier, the bank confirmation letter and the media screening output. These records should be linked to your vendor master data so that the verification status and expiry date are visible during invoice processing.
Finance and procurement teams should also define internal escalation procedures covering the specific red flags listed in the decision: unusual pricing, payment to third-party accounts, unexplained changes in supplier details, and transactions outside the supplier's licensed activity. When a red flag is raised, the input tax claim on that supply should be held until the escalation is resolved and documented.
Practical Preparation Checklist
With October 1 approaching, take these six steps now. If your workflows do not yet address these requirements, contact 1Stop Connect and its accredited partner for advisory support before the deadline.
- Audit your active supplier list. Identify every supplier from whom you claimed input tax in the last 12 months. Flag anyone not yet formally verified.
- Apply the thresholds. Segment by annual purchase volume: above AED 100,000 (standard checks, AED 10k waiver lost), above AED 375,000 (enhanced checks required). Re-verify anyone not checked in the last 12 months.
- Build verification templates. Capture trade licence, FTA VAT registration, authorised representative ID, and meeting record. For the enhanced tier, add a bank confirmation letter and media screening output.
- Gate your procurement workflow. No purchase order without a completed verification file. No input tax deduction on invoices from unverified suppliers. Build these controls into your ERP or accounting approval flow.
- Set re-verification reminders. Flag suppliers approaching 12 months since last check so they are re-verified before the next invoice is processed.
- Train your team. Accounts payable, procurement, and finance all carry part of this requirement. Gaps between functions are where failures happen.
"A valid VAT invoice used to be sufficient. From October 1 it is the starting point, not the finish line. Businesses that treat supplier verification as a procurement formality will find the FTA treating their input tax recovery as optional."
— Dr. Dieter Hovorka, PhDFrequently Asked Questions
What is FTA Decision No. 13 of 2026? +
Issued July 22, 2026 and effective October 1, 2026, it sets out the measures UAE VAT-registered businesses must follow to verify suppliers and supplies before deducting input tax. It implements Article 54(bis) of the UAE VAT Law, which gives the FTA power to deny input tax recovery where a supply is connected to tax evasion and the recipient knew or should have known. Failure to carry out the required checks is treated as constructive knowledge.
Does the verification requirement apply to all suppliers? +
It applies to all UAE VAT-registered businesses. Supplies under AED 10,000 (excluding VAT) are generally exempt from the checks, but this exemption disappears if total annual purchases from that supplier exceed AED 100,000. Suppliers with annual supplies above AED 375,000 require enhanced checks including a bank confirmation letter and media screening.
What happens if I do not carry out the checks? +
Failure to verify is treated as deemed knowledge of any connection to tax evasion, removing your ability to defend an input tax claim on that basis. The FTA can deny input tax recovery on affected purchases. Under the 2026 penalty framework, unpaid tax liabilities attract 14% per annum. Speak to 1Stop Connect and its accredited partner if you need to assess your current exposure before October 1.
How often do I need to re-verify an existing supplier? +
At least every 12 months. Any supplier not verified within the previous 12 months must be re-verified before input tax is claimed from them. If a supplier's key details change (trade licence, VAT registration, banking details, authorised representative) you should re-verify immediately.