A practical guide to the FTA's new supplier and transaction verification requirements.
Who should read this?
CFOs, Finance Heads, Tax Managers, Procurement Teams, Accounts Payable Teams, Internal Auditors and UAE businesses claiming input VAT.
The Question Every Business Should Be Asking
For years, the input VAT process has often looked like this:
Invoice received → VAT checked → accounting entry passed → input VAT claimed.
But is having a valid tax invoice enough?
From 1 October 2026, UAE taxable persons will need to pay greater attention to the supplier, the transaction and the supporting evidence before deducting input VAT.
The Federal Tax Authority has issued Decision No. 13 of 2026 — Measures, Procedures and Conditions required by Taxable Persons for the Verification of the Validity and Integrity of the Supplies before Deduction of Input Tax. The Decision was issued on 22 July 2026 and becomes effective from 1 October 2026.
The Legal Change behind the New Requirements
The new verification framework arises from Article 54(bis) of the UAE VAT Law, introduced by Federal Decree-Law No. 16 of 2025 and effective from 1 January 2026. The provision allows input VAT to be denied where a taxable person
- knew or
- should have known
that a supply was connected with tax evasion. Failure to verify the validity and integrity of supplies in accordance with FTA-prescribed measures may be relevant in determining whether the taxable person should have known of such a connection.
Our view
The significance of this Decision goes beyond another VAT compliance requirement.
The focus appears to be moving from:
"Do I have a VAT invoice?"
to:
"Can I demonstrate that the supplier and transaction are genuine, commercially reasonable and properly supported?"
For businesses with a large supplier base, this means that procurement, finance, tax and accounts payable processes may need to work together more closely.
What Does the New Framework Require?
Think of the new requirement as two simple questions:
1. WHO are you buying from? — Supplier Verification
2. WHAT exactly are you buying and how genuine is the transaction? — Supply Verification
The Decision requires verification of the supplier and verification of each taxable supply received or accepted, together with appropriate documentation.
The Verification Steps
STEP 1 — Verify Your Supplier
The level of verification depends on whether the supplier is an individual or a legal entity.
If the supplier is an individual
The business must:
- obtain valid identification such as an Emirates ID or passport; and
- meet the supplier either physically or virtually before the supply.
If the supplier is a company
The business must:
- verify the supplier's incorporation through official databases or obtain its certificate of incorporation;
- ensure the incorporation details correspond with the entity's name, address, employees and related information; and
- verify the identity of the director, agent or employee authorised to represent the supplier through valid identification.
Practical takeaway
Businesses should consider whether their vendor-master process captures sufficient evidence to demonstrate that the supplier has been appropriately verified.
STEP 2 — Check Whether the Supplier Actually Operates
A supplier may have a valid registration, but the business should also consider whether there is an actual place of business.
The Decision requires the taxable person to verify the existence of the supplier's actual place of business through appropriate electronic means or a field visit.
The location should also be compatible with the nature of the supplier's activities.
Example
If a supplier claims to undertake substantial manufacturing or trading activities, but its business premises appear inconsistent with the scale or nature of those activities, the business should consider whether additional verification or documentation is appropriate.
STEP 3 — Identify Supplier Red Flags
The Decision specifically identifies three risk indicators.
Red Flag 1 — Frequent address changes
The supplier has changed its address more than twice in the previous 12 months.
Red Flag 2 — Frequent changes in key employees
The supplier has changed its managers or key persons with whom the taxable person deals more than twice in the previous 12 months.
Red Flag 3 — Unusual transaction levels
The supplier undertakes transactions that are disproportionate or unexpected considering its:
- volume;
- value;
- nature;
- business size; and
- business history.
What if a red flag exists?
Where a risk indicator exists, the taxable person must retain a clear and justified explanation for its applicability and be able to submit that explanation to the FTA upon request. The explanation should not contradict the evidence or information available to the business.
The practical lesson: A red flag should trigger documentation—not panic.
STEP 4 — Pay Attention to High-Value Suppliers
Where the value of supplies received from a supplier exceeds AED 375,000 during the previous 12 months, or is expected to exceed this amount during the next 12 months, additional checks apply.
The taxable person must verify that the supplier has a bank account and review client recommendations where available.
The business must obtain written confirmation from an authorised UAE bank confirming that the supplier has a bank account.
The Decision clarifies that this confirmation does not have to be issued to the recipient of the supply.
Businesses must also review publicly available reviews and media coverage from reliable sources and assess whether they are consistent with the supplier's business and whether there are indicators of suspected tax evasion.
STEP 5 — Verify the Transaction, Not Just the Supplier
This is perhaps the most important shift.
Even if the supplier is genuine, the business must assess the supply itself.
The transaction should have genuine commercial reasons, and the business should assess the circumstances surrounding the supply.
STEP 6 — Review the Payment Arrangement
The payment method and conditions must be commercially justifiable.
Additional attention is required where:
- a third party makes or receives the payment; or
- payment is made to a bank account outside the supplier's country of incorporation.
In such cases, there should be a reasonable commercial explanation that does not contradict available evidence.
What about cash?
Payment should be made electronically.
If payment is made in cash, it must:
- have a documented commercial reason;
- comply with applicable tax-law thresholds; and
- be easily verifiable.
STEP 7 — Check the Price and Nature of Supply
The business should verify that the price or profit margin is not commercially unjustifiable or significantly different from market conditions without a clear reason.
The business must also verify that the goods or services supplied fall within:
- the supplier's ordinary business activities; or
- activities the supplier is licensed to conduct.
Example
Suppose a supplier normally provides IT services but suddenly supplies a high-value category of goods unrelated to its ordinary or licensed activities.
The question should not simply be:
"Is the invoice available?"
The business should be able to establish:
Why was this supplier used, and why does this transaction make commercial sense?
STEP 8 — For Goods, Verify Their Authenticity and Ownership
For goods, the Decision requires verification of:
- authenticity;
- origin;
- supplier's ownership; or
- the supplier's right to dispose of the goods.
This can be particularly relevant for businesses involved in trading, commodities and other high-value goods.
Intermediaries
Where the supplier acts as an intermediary, there should be a clear and justifiable commercial explanation for the supplier's role in the transaction.
STEP 9 — Documentation Is the Real Game-Changer
Performing a check is one thing. Being able to prove that the check was performed is another.
For each supplier and taxable supply, the Decision requires businesses to:
- verify the supplier when dealing with it for the first time;
- re-verify the supplier where it has not been verified during the previous 12 months;
- verify each taxable supply received or accepted;
- document the verification steps;
- retain supporting documents and records; and
- maintain a documented policy identifying the persons responsible for implementation, review and supervision.
This means your VAT file may need to tell a story:
Supplier exists → Supplier is appropriate → Transaction is genuine → Payment is explainable → Supply is commercially reasonable → Evidence is retained → Input VAT is claimed.
Is There Any Relief for Small Transactions?
Yes.
The Decision allows taxable persons to disregard the prescribed verification measures where the consideration excluding VAT is below AED 10,000.
However, this exception is not available where total supplies received from the same supplier:
- exceeded AED 100,000 in the previous 12 months, or
- are expected to exceed AED 100,000 in the next 12 months.
Important practical point
Businesses should therefore monitor supplier-wise cumulative purchases, rather than looking only at the value of an individual invoice.
What Should Businesses Do Now?
The effective date is 1 October 2026.
Instead of waiting until October, businesses should consider the following readiness plan:
1. Identify your supplier
Classify suppliers based on value, nature and risk.
2. Identify high-risk suppliers
Focus on address changes, employee changes and unusual transactions.
3. Review vendor onboarding
Check whether identity, incorporation, authorised representatives and business premises are adequately verified.
4. Introduce a transaction checklist
Cover commercial rationale, payment, pricing, licensed activity and—where relevant—goods ownership and authenticity.
5. Build documentation controls
Create a central mechanism to retain verification evidence.
6. Define responsibilities
Clearly assign responsibility between Procurement, Finance, Tax and Accounts Payable.
Are You Ready for 1 October 2026?
The new framework marks a significant shift in how businesses need to approach input VAT recovery in the UAE.
At APMH, we help businesses translate these requirements into practical, workable controls—from supplier verification and transaction-level reviews to documentation and ongoing compliance monitoring. With 1 October 2026 approaching, businesses should not wait for an FTA query to test whether their processes are adequate.
Let us help you assess your current controls, identify the gaps and build an input VAT verification framework that stands up to scrutiny.
This article is intended for informational purposes based on the FTA Decision as issued. For advice tailored to your business, please consult with a qualified professional.
Frequently Asked Questions
FTA Decision No. 13 of 2026 was issued on 22 July 2026 and becomes effective from 1 October 2026. It applies to supplies received or accepted on or after that date.
No. From 1 October 2026, a valid tax invoice is not sufficient on its own. You must also be able to demonstrate that the supplier is genuine and appropriately verified, that the transaction has a genuine commercial rationale, and that the supporting evidence has been retained.
The framework arises from Article 54(bis) of the UAE VAT Law, introduced by Federal Decree-Law No. 16 of 2025 (effective 1 January 2026). Input VAT can be denied where a taxable person knew, or should have known, that a supply was connected with tax evasion. Failure to verify supplies as prescribed may be relevant to whether you “should have known.”
A supplier is treated as high-value where supplies received from that supplier exceed AED 375,000 in the previous 12 months, or are expected to exceed that amount in the next 12 months. For such suppliers you must obtain written confirmation from an authorised UAE bank that the supplier holds a bank account (this need not be addressed to you), and review publicly available reviews and media coverage from reliable sources for indicators of suspected tax evasion.
Verification measures may be disregarded where the consideration excluding VAT is below AED 10,000. However, this relief is not available if total supplies from the same supplier exceeded AED 100,000 in the previous 12 months, or are expected to exceed AED 100,000 in the next 12 months. Monitor supplier-wise cumulative purchases, not just individual invoice values.
(1) The supplier has changed its address more than twice in the previous 12 months; (2) the supplier has changed the managers or key persons you deal with more than twice in the previous 12 months; and (3) the supplier undertakes transactions that are disproportionate or unexpected given its volume, value, nature, business size and history. A red flag should trigger documentation and a clear, justified explanation—not panic.
Payment should generally be made electronically. If a payment is made in cash, it must have a documented commercial reason, comply with applicable tax-law thresholds, and be easily verifiable. Extra attention is also required where a third party makes or receives payment, or where payment is made to a bank account outside the supplier’s country of incorporation.
For each supplier and taxable supply you should verify the supplier at onboarding and re-verify where not verified in the previous 12 months, verify each supply received or accepted, document the verification steps, retain supporting documents and records, and maintain a documented policy identifying who is responsible for implementation, review and supervision.
APMH / Moores Rowland helps businesses translate these requirements into practical, workable controls—from supplier verification and transaction-level reviews to documentation and ongoing compliance monitoring. We can assess your current controls, identify the gaps and help build an input VAT verification framework that stands up to FTA scrutiny.