Your Tax Invoice Is No Longer Enough: The New Supplier Checks You Need Before Claiming VAT Back

UAE VAT · NEW RULES FROM 1 OCTOBER 2026

Last updated: November 2026 · Reflects FTA Decision No. 13 of 2026 and Article 54 bis of the UAE VAT Law

For years, the rule was simple: get a valid tax invoice, and you can claim the VAT back. From 1 October 2026, that is no longer true. The FTA now expects you to prove you checked your supplier before you claimed. If you didn't, and that supplier turns out to be part of a VAT fraud chain, your input VAT can be denied, even though you paid it in good faith.

Most of the commentary so far has been written for large corporates. This guide is for SMEs: what the rule says, what it means in practice, and a checklist your bookkeeper can actually follow.

What changed on 1 October 2026

Two pieces of law now work together:

• Article 54 bis of the VAT Law, added by Federal Decree-Law No. 16 of 2025 and in force from 1 January 2026, lets the FTA deny input VAT where a supply or supply chain is connected to tax evasion and the business knew or should have known.
• FTA Decision No. 13 of 2026, issued on 22 July 2026 and effective from 1 October 2026, spells out the checks a business must complete before deducting input VAT.

Put simply: the invoice used to be the proof. Now it is only the starting point of your claim. The proof is your file showing that you checked who you were dealing with.

The "knew or should have known" test, in plain English

This is the part that worries business owners most, and rightly so. The FTA does not have to show you were part of a fraud. It only has to show that the supply chain was connected to evasion and that you knew or should have known.

And here is the key: under Decision No. 13, if you did not carry out the required verification, you can be treated as having known. In other words, skipping the checks removes your best defence.

Done properly, the checks work the other way. A documented verification file is how you show the FTA you acted in good faith, so a supplier's fraud does not become your tax bill.

Which suppliers need checking?

Not every coffee receipt needs a background check. The Decision builds in thresholds:

Your spend with the supplier	What's required
Single supply under AED 10,000 (excl. VAT), and total supplies from that supplier of AED 100,000 or less over 12 months	Outside the verification requirement
Total supplies from that supplier above AED 100,000 over the previous or next 12 months	Standard checks apply to all supplies from that supplier, including small ones
Total supplies above AED 375,000 over the previous or next 12 months	Standard checks plus bank account confirmation and a review of public information

Note the words "previous or next 12 months". If you sign a new supplier on a contract you expect to exceed these amounts, the checks apply from the start, not after you've crossed the line.

Checks on the supplier

For in-scope suppliers, you should verify and document:

1. Identity. For a company: trade licence and incorporation details. For an individual: identification documents.
2. Authorised representatives. Who signs for them, and whether that person really represents the business.
3. A real place of business that fits their activity. This can be checked electronically or by a site visit. A "general trading" company invoicing you for heavy equipment from a shared desk is a mismatch worth noting.
4. Licensed activity. Is what they're selling you actually within their licensed activities?
5. For suppliers above AED 375,000 a year: confirmation that they hold a bank account (practitioners are reading this as a letter from a UAE bank), and a review of public information such as media coverage and customer reviews.

Checks on the transaction itself

It is not only about who the supplier is. The FTA also expects you to look at the deal:

• Commercial reason. Is there a genuine business purpose for the purchase?
• Price. Is it in line with the market? A price far below market is a classic sign of a missing-trader chain.
• Payment terms and method. Pay special attention to payments to a third party, payments to a foreign bank account, and cash. Each needs a documented commercial reason.
• The goods. Can you confirm their authenticity and origin?
• Intermediaries. If your supplier is just passing goods along from someone else, more checking is expected.

Red flags the FTA has named

The Decision and the commentary on it point to specific warning signs. If you see any of these, don't just note it. Document how you looked into it and why you were satisfied:

• The supplier keeps changing its address or key people (guidance refers to more than twice in a year)
• Transaction sizes that are out of proportion to the supplier's apparent size
• Deals that don't fit the supplier's normal business profile
• Requests to pay a different company, a personal account, or an overseas account
• Pressure to pay in cash
• Prices that look too good to be true

Cash payments: a second, separate restriction

Cabinet Decision No. 149 of 2026, which amended the VAT Executive Regulation from 1 October 2026, adds another rule: input VAT will be blocked on supplies above a threshold set by the Minister of Finance where the payment is made, or intended to be made, in cash.

At the time of writing, the cash threshold itself has not been published. Our advice doesn't wait for it: move supplier payments to bank transfer now. A bank trail also helps with Decision No. 13.

A practical checklist for SMEs

Here's how we're setting this up for our bookkeeping clients. It takes some work once, then becomes routine.

1. Pull a 12-month supplier report. Sort suppliers by total spend. Mark everyone above AED 100,000 and above AED 375,000.
2. Build a supplier file for each in-scope supplier. Trade licence, TRN certificate, authorised signatory, address evidence, and licensed activities.
3. For suppliers above AED 375,000: request bank account confirmation and save a short note of your public-information search.
4. Check new suppliers before the first invoice is booked, not at the VAT return.
5. Write a one-page verification policy naming who performs the checks, who reviews them, and who signs off. The Decision expects this to be documented.
6. Re-verify every 12 months. Put a date in the calendar.
7. Stop paying suppliers in cash and document a reason for any third-party or overseas payment.
8. Keep everything with your VAT records so it can be produced quickly if the FTA asks.

The bottom line

This rule is aimed at VAT fraud chains, not honest SMEs. But honest SMEs are the ones who get caught out, because they've never had to show their working before. The fix is not complicated: a short policy, a file per key supplier, and an annual review. What's expensive is discovering you need them during an FTA audit, when the input VAT has already been claimed.

Not sure your supplier records would stand up to an FTA review? As part of our bookkeeping and VAT service, we run the supplier spend analysis, set up the verification files and policy, and build the checks into your monthly close, so your input VAT is protected before it's claimed.

Speak to a partner about your VAT position →

This article is general information, not tax advice. It is based on FTA Decision No. 13 of 2026, Article 54 bis of the VAT Law and published professional commentary as of November 2026. Your position depends on your facts. Verify current requirements with the FTA or a qualified UAE tax adviser before acting.