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The Federal Tax Authority will refuse VAT refunds where businesses have not conducted required verification of suppliers and supplies under Decision No. 13 of 2026 that takes effect on October 1 according to the regulator. The rules derive from Article 54 bis of the VAT Law inserted by Federal Decree-Law No. 16 of 2025 and apply even if the claiming business was unaware of any evasion further up the supply chain a report in Arabian Business stated. Tax advisers have urged companies to integrate the checks into procurement workflows immediately to protect their compliance status.
Businesses must verify a supplier’s identity the first time they engage and repeat the process every 12 months under the FTA decision. The verification requires matching identity documents against official databases confirming the authorised representative and ensuring the supplier maintains a physical place of business consistent with its registered activity according to Khaleej Times. Three risk indicators must also be assessed including any change of address shifts in key personnel or transactions that appear disproportionate to the supplier’s size and history.
Supplier verification must be carried out the first time a business deals with a supplier and repeated if twelve months have passed. It requires identity documentation to be checked against official databases verification of the individual authorised to represent the supplier and confirmation that the supplier has an actual place of business consistent with its claimed activity Thomas Vanhee partner at Aurifer told The National. For suppliers delivering more than Dh375 000 in annual value businesses must secure written confirmation from a UAE-authorised bank that the supplier holds an account there and review public records and media coverage of the supplier he added.
The regulation provides a de minimis exemption for individual supplies below Dh10 000 excluding VAT but the exemption ceases once total supplies from the same supplier exceed Dh100 000 in any 12-month period according to the FTA decision. The UAE introduced VAT in 2018 at a standard rate of five per cent on most goods and services with input tax recovery forming a core element of the regime for registered businesses the Ministry of Finance has previously stated. The new due diligence layer builds on Cabinet Decision No. 149 of 2026 issued earlier this month that clarified input tax rules for employee accommodation medical products and cash payments above thresholds to be set by the minister.
Legal experts have noted that the changes will require companies to maintain comprehensive records of all verification steps to withstand potential FTA audits. The authority can block input tax deductions where it determines a supply forms part of a tax evasion arrangement even without direct involvement by the claimant according to provisions in the updated executive regulation. Businesses should review their supplier lists and update internal policies before the October deadline to avoid disruptions in reclaiming VAT paid on purchases.
The Ministry of Finance has described the cumulative amendments as part of ongoing efforts to enhance transparency align with international standards and support voluntary compliance while reducing disputes. The FTA first outlined the supplier verification framework in August giving taxable persons a short preparation window before the rules become mandatory on October 1. Further guidance on exact thresholds for cash payment restrictions is expected in a separate ministerial decision in the coming weeks.
