UAE Introduces New VAT Due Diligence Requirements for Suppliers and Supplies

Businesses operating in the United Arab Emirates will be required to carry out and document prescribed checks before deducting input VAT. Federal Tax Authority Decision No. 13 of 2026 takes effect on 1 October 2026 and introduces a structured verification framework for both suppliers and individual supplies.

Legal framework and potential consequences

The Decision implements Article 54 bis of the UAE VAT Law, introduced by Federal Decree-Law No. 16 of 2025. Under that provision, the Federal Tax Authority may restrict input VAT recovery where a transaction forms part of a supply chain connected with tax evasion and the taxable person knew, or should reasonably have known, of that connection. Failure to perform the required verification may therefore expose a business to the denial of input VAT deductions.

Supplier verification

A supplier must be verified before the first transaction and verified again if no review has been completed during the preceding 12 months. Depending on whether the supplier is an individual or a legal entity, the process may include checking valid identification, confirming incorporation details against official records, verifying the authority of the supplier’s representative, and establishing that the supplier has a genuine business location consistent with its stated activities.

The assessment must also consider specified risk indicators, including repeated changes to the supplier’s address or key personnel and transactions that appear inconsistent with the scale or history of its business. Where supplies from a supplier exceed, or are expected to exceed, AED 375,000 over a 12-month period, additional checks apply. These include obtaining appropriate confirmation of a UAE bank account and reviewing relevant public information concerning the supplier’s business standing.

Verification of each supply

In addition to periodic supplier checks, businesses must assess each supply before claiming the related input VAT. The review should establish that the transaction has a credible commercial rationale; that pricing and margins are commercially defensible; that the goods or services fall within the supplier’s licensed activities; and, where goods are involved, that their title and origin can be supported. Any intermediary’s role should also have a clear business purpose.

Payments should generally be made electronically. If cash is used, the business should retain a documented commercial explanation. The Decision also requires a written internal policy identifying who performs, reviews and supervises the verification process, thereby linking VAT compliance with procurement, finance and accounts-payable controls.

Limited relief for low-value supplies

The Decision contains a de minimis exception for supplies with a value below AED 10,000, excluding VAT. The relief does not apply, however, once aggregate supplies from the same supplier exceed AED 100,000 during the previous 12 months or are expected to exceed that amount during the following 12 months. Businesses should therefore monitor cumulative supplier spend rather than assessing the threshold solely by reference to individual invoices.

Recommended actions

• Review supplier onboarding and renewal procedures against the new verification requirements.
• Introduce a risk-based supplier file with evidence of identity, authority, premises, bank details and relevant public-source checks.
• Build transaction-level verification into procurement and input VAT approval workflows.
• Track the AED 100,000 and AED 375,000 thresholds on a rolling 12-month basis.
• Adopt a written policy assigning responsibility for performance, review, escalation and record retention.
• Train procurement, finance and accounts-payable personnel before the rules take effect.

The new framework moves UAE VAT compliance beyond the possession of formally valid invoices and towards demonstrable, risk-based due diligence. Businesses with recurring or high-value supplier relationships should prioritise implementation, as the available exemptions are narrow and inadequate records may affect the recoverability of input VAT.