For most UAE businesses, recovering input VAT has always been a matter of holding a valid tax invoice and being able to show the purchase was made for a taxable business purpose. From 1 October 2026, that is no longer enough.

The Federal Tax Authority has issued Decision No. 13 of 2026, setting out the measures, procedures and conditions a Taxable Person must follow to verify the validity and integrity of the supplies they receive before deducting Input Tax. In plain terms: the UAE has introduced a formal "know your supplier" obligation, and the burden of proving you took it seriously now sits squarely with the buyer.

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Step One: Verifying the Supplier

Before you deal with a supplier for the first time, and again whenever twelve months have passed without a check, the Decision requires the following.

If the supplier is an individual, you must obtain a copy of valid proof of identity (Emirates ID or passport) and meet them, either in person or virtually, before the supply is made.

If the supplier is a company, you must verify its incorporation through official databases or obtain a copy of the certificate of incorporation, and the Decision adds a condition that is easy to miss: the incorporation details must be valid and identical to the entity's name, address, employees and other related information. It is not enough that the paperwork matches; it must also be current. You must also verify the identity of the director, agent or employee authorized to represent the supplier, again through a valid Emirates ID or passport.

In both cases, you must verify the place of business. The Decision requires you to confirm the existence of an actual place of business, either through appropriate electronic means or by conducting a field visit, and to satisfy yourself that the premises are compatible with the nature of the activities the supplier claims to carry out. A trading company operating from a residential address, or a large logistics supplier with no visible warehouse, is exactly what this provision is designed to catch.

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The Three Risk Indicators

The Decision names three specific red flags that must be checked:

1. The supplier has changed its address more than twice in the previous 12 months.

2. The supplier has changed its key employees, managers, or the people you actually deal with, more than twice in the previous 12 months.

3. The supplier has undertaken transactions that are disproportionate or unexpected in volume, value or nature compared with the size of its business and its trading history.

The presence of a risk indicator does not automatically block your input tax claim. What it does is shift the burden: where one applies, you must retain a clear and justified explanation for its applicability and submit that explanation to the Authority on request, provided, in the Decision's own words, that the risk indicators "do not contradict with the evidence or information available to the Taxable Person."

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The AED 375,000 Trigger

Where the value of supplies received from a single supplier exceeds AED 375,000 over the previous 12 months, or is expected to exceed that over the next 12 months, two additional steps apply.

First, you must obtain written confirmation from an authorized bank in the UAE that the supplier holds a bank account, and that confirmation must be free of relevant reservations or conditions. Helpfully, the Decision clarifies that the confirmation does not need to be addressed or issued to you as the recipient, a copy obtained from the supplier is sufficient.

Second, you must review publicly available reviews and media coverage about the supplier from reliable sources, alongside any client recommendations available, checking that what you find is consistent with the nature and size of the supplier's business and shows no indicators of suspected Tax Evasion.

Note carefully that this is a cumulative, per-supplier threshold measured over a rolling 12-month window, not a per-invoice test.

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Step Two: Verifying the Supply Itself

The Decision frames the whole obligation as applying "for each supplier and each supply received". Supplier checks are periodic; supply checks are transaction by transaction, and they fall into three groups.

Commercial rationale. You must carry out a general assessment of the conditions of the transaction and satisfy yourself that the supplier's involvement rests on genuine commercial reasons.

Payment conditions. The payment method and terms must be commercially justifiable. Where a third party is involved in making or receiving payment, or where payment goes to a bank account outside the supplier's country of incorporation, there must be a reasonable commercial explanation that does not contradict information available to you. Consideration must be paid by electronic means; where cash is used, it must rest on a documented commercial reason, fall within the thresholds set in the applicable tax legislation, and be easily verifiable.

Circumstances of the supply. You must check that the price or profit margin is not commercially unjustifiable or materially out of line with market conditions without clear reason; that the goods or services fall within the supplier's ordinary activity and the activities permitted by its commercial license; that the goods are authentic, that their origin is sound and that the supplier genuinely owns them or has the right to dispose of them; and, where the supplier is acting as an intermediary, that there is a clear and justifiable commercial explanation for its role in the chain.

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Documenting It - The Part Most Businesses Will Overlook

Article 5 turns all of the above into a records obligation. You must document the verification steps taken and retain the supporting documents and records in a form that allows the Authority to check that you implemented the process correctly.

More significantly, you must maintain a documented policy identifying the people responsible for implementing, reviewing and supervising the verification procedures, setting out their powers and responsibilities clearly, and that policy must be kept at your designated record-keeping location.

This is not a checklist to be reconstructed during an audit. It is a standing internal control that the Authority expects to see already in place.

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The Small-Value Exception And Where It Stops

The Decision provides sensible relief for low-value purchases. You may disregard these measures on Taxable Supplies received where the Consideration, excluding VAT, is less than AED 10,000.

But the relief has a ceiling. It does not apply where the total value of supplies received from that supplier exceeds AED 100,000 over the previous 12 months, or is expected to exceed that over the next 12 months. A stationery supplier invoicing you AED 3,000 a month stays comfortably inside it at AED 36,000 a year; a subcontractor billing AED 9,000 a month does not, at AED 108,000.

The practical consequence is that the exception protects genuinely incidental purchases, not regular small-ticket suppliers. Testing it requires you to look at the supplier relationship as a whole, not the invoice in front of you.

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Why It Matters

Decision No. 13 says what must be done; Article 54 bis carries the consequence -a denied input tax claim, potentially across a period, on a supplier you dealt with in good faith, plus the ordinary administrative penalties for failing to keep the records and policy Article 5 requires.

Businesses already running supplier due diligence for anti-money-laundering purposes will find much of this familiar. The difference is that getting it wrong is now a VAT cost.

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How Onecentive Can Help

We work with UAE businesses to build supplier verification frameworks that satisfy Decision No. 13 without adding unnecessary friction to day-to-day purchasing - supplier risk screening, documentation templates, the internal policy required under Article 5, and integration of the verification step into your existing bookkeeping and accounts payable workflow.

If you would like to review your supplier base ahead of 1 October 2026, we would be glad to help.

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For more information, reach out to our team of experts:

📧 info@one-centive.com

🌐 www.one-centive.com

📍 Office 508, The Binary by Omniyat, Business Bay, Dubai, UAE

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Onecentive LLC-FZ is licensed under Meydan Free Zone, Dubai, UAE. This article is for informational purposes only and does not constitute legal or financial advice.

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