Until 1 October 2026, a valid UAE tax invoice has been the primary document a business needs to support an input VAT deduction. From 1 October 2026, it is no longer sufficient on its own.
FTA Decision No. 13 of 2026, issued by the Federal Tax Authority on 22 July 2026 and taking effect in 21 days, establishes a mandatory supplier and supply verification framework that every VAT-registered business in the UAE must follow before claiming input tax. The decision implements Article 54 bis of the UAE VAT Law (Federal Decree-Law No. 8 of 2017, as amended by Federal Decree-Law No. 16 of 2025) — a provision inserted specifically to allow the FTA to deny input VAT recovery where a transaction forms part of a chain connected to tax evasion, and the buyer knew or reasonably should have known. The Decision defines what “should have known” means. It answers that question with documented obligations, not judgment calls.
This article explains the full framework — the legislative chain behind it, who it applies to, what the three monetary thresholds actually mean in practice, exactly what you must verify and document, and the seven actions every UAE business should complete before the 1 October 2026 deadline.
Why the FTA Introduced These Rules — The Article 54 Bis Legislative Chain
UAE VAT has operated since January 2018 under Federal Decree-Law No. 8 of 2017. Under that original framework, input VAT recovery was straightforward: hold a valid tax invoice from a registered supplier, use the goods or services for taxable purposes, and the deduction was available. The system relied on suppliers to be genuine, their invoices to reflect real transactions, and their VAT to reach the Federal Tax Authority.
The gap the FTA identified was VAT fraud through supply chain manipulation — specifically, transactions structured so that VAT is charged to the buyer, claimed as an input deduction, but never remitted to the FTA by the supplier. The buyer recovers tax that was never paid to the state.
Federal Decree-Law No. 16 of 2025 amended the VAT Law and inserted a new provision — Article 54 bis — effective 1 January 2026. This provision gives the FTA the legal authority to deny input tax recovery where a taxable supply forms part of a chain associated with tax evasion, and the taxable person receiving the supply knew, or should reasonably have known, about that connection.
The problem Article 54 bis created was practical: what does “should have reasonably known” actually mean for a finance director approving a supplier invoice in good faith? The provision created the obligation without defining its operational content.
FTA Decision No. 13 of 2026 fills that gap. Issued on 22 July 2026 and effective 1 October 2026, it sets out the specific measures, procedures, and conditions a taxable person must follow to demonstrate they exercised reasonable care before deducting input tax. Compliance with the Decision is how a business establishes that it did not know — and could not reasonably have known — that a supply was connected to evasion. Non-compliance is how a business loses the argument when the FTA audits.
The legislative chain is therefore:
- Federal Decree-Law No. 8 of 2017 — UAE VAT Law (original framework)
- Federal Decree-Law No. 16 of 2025 — inserted Article 54 bis, effective 1 January 2026
- FTA Decision No. 13 of 2026 — defines what Article 54 bis requires in practice, effective 1 October 2026
Understanding this chain matters because it explains why the Decision has no appeal mechanism and no grace period. It is not a new tax or a new rate — it is an operational standard for an obligation that already exists in law since January 2026.
Who Must Comply
FTA Decision No. 13 of 2026 applies to every taxable person under the UAE VAT Law — defined as any business registered for VAT, or required to be registered for VAT, in the UAE. There is no exemption based on business size, industry, or legal structure.
Free zone companies are not exempt. A common misconception in the UAE business community is that free zone status creates some separation from federal tax obligations. It does not. Free zone companies — whether registered in IFZA, DMCC, Meydan Free Zone, Ajman Free Zone, or any other UAE free zone authority — operate within the scope of the UAE VAT Law. If your free zone company is VAT-registered and claims input tax on goods or services received from third-party suppliers, FTA Decision No. 13 of 2026 applies to you from 1 October 2026.
The decision applies to supplies received, not supplies made. This is a buyer-side obligation. It governs the due diligence a business must conduct on its suppliers and on the purchases it makes before deducting input VAT. It does not create new obligations on how a business issues tax invoices to its own customers — those obligations exist separately under the VAT Law.
The thresholds create a tiered compliance load, not an exemption. As covered in detail in the next section, the Decision builds in three monetary thresholds that reduce the documentation burden for smaller, lower-value transactions. Crossing those thresholds increases the required verification depth. But below the lowest threshold of AED 10,000 per supply is the only point where the verification measures can be skipped entirely — and only if cumulative annual spend with that supplier stays below AED 100,000.
The Three Monetary Thresholds That Determine Your Compliance Load
FTA Decision No. 13 of 2026 does not apply identical verification requirements to every purchase. It uses three monetary thresholds to calibrate the depth of due diligence required based on transaction value and cumulative supplier spend. Understanding how these thresholds interact is the most practically important element of the Decision for most finance teams.
| Threshold | What it triggers |
|---|---|
| Below AED 10,000 per supply (excluding VAT) | Verification measures may be skipped entirely — but only if cumulative 12-month spend with that supplier stays below AED 100,000 |
| AED 100,000 cumulative spend with one supplier over 12 months | The AED 10,000 per-supply exception is cancelled. Full verification is required for all supplies from that supplier regardless of individual invoice size |
| AED 375,000 cumulative spend with one supplier over 12 months | Full verification applies plus additional requirements: a written bank account confirmation and a review of publicly available information about the supplier |
The threshold trap most businesses will miss. The AED 10,000 per-supply exception appears straightforward. In practice, it disappears for most active supplier relationships without warning. A UAE trading company that buys goods from a regular supplier through 20 invoices of AED 6,000 each — each individually below AED 10,000 — has cumulative annual spend of AED 120,000. The moment cumulative 12-month spend crosses AED 100,000, the exception is cancelled and full verification is required retroactively for all supplies from that supplier.
The Decision requires businesses to monitor cumulative spend per supplier against the AED 100,000 threshold on a rolling 12-month basis. This is not a calendar year calculation — it is a rolling 12 months from the date of each purchase. A supplier engagement that began in November 2026 and crosses AED 100,000 by April 2027 triggers the full verification requirement in April 2027, not at the start of a new calendar year.
The AED 375,000 threshold adds two specific obligations. At this cumulative spend level, a business must additionally obtain written confirmation from the supplier of their bank account details — matched against what appears on their invoices — and must conduct a review of publicly available information about the supplier, including company registry records and any negative press or enforcement history. These two steps go beyond the standard supplier onboarding many UAE businesses already conduct.
Is your supplier verification file ready for the FTA?
Al Arabiya Group reviews your supplier documentation, drafts the Article 5(4) written policy required by FTA Decision No. 13 of 2026, and confirms your compliance position before the deadline.
What You Must Verify — Two Levels, Both Mandatory
FTA Decision No. 13 of 2026 organises its verification requirements into two distinct categories: verifying the supplier (who you are buying from) and verifying the supply (what you are buying and how you are paying for it). Both are mandatory. Both must be documented. Completing one without the other does not satisfy the Decision.
Level 1 — Supplier Verification (Article 3 of FTA Decision No. 13 of 2026)
Before relying on input tax from a new supplier — or from an existing supplier not verified in the past 12 months — a business must confirm the following:
Identity. For an individual supplier, a business must obtain a copy of a valid Emirates ID or passport and conduct a meeting — in person or by video — before the supply is made. For a company supplier, identity verification requires confirmed incorporation details matched against official databases or a certificate of incorporation, plus identity documents for the authorised representative dealing with your business directly.
Address and place of business. The supplier must have a genuine place of business that is consistent with the nature of their commercial activities. Confirmation must come from an electronic check or a physical site visit — not just from the address on their trade licence.
Risk indicators. A business must check whether the supplier has changed its registered address or key personnel more than twice in the previous 12 months, and whether the supplier’s transaction volumes are proportionate to its apparent size and history. Where a red flag is identified, the business must retain a documented, justified explanation on file — not simply reject the supplier or ignore the flag.
Bank account confirmation and reputation review — triggered at the AED 375,000 cumulative threshold only. This requires written confirmation from the supplier of their bank account details, matched against the account used on invoices, plus a review of publicly available information about the supplier including company registry records and any enforcement or litigation history.
Level 2 — Supply Verification (Article 4 of FTA Decision No. 13 of 2026)
For each taxable supply received, a business must additionally check the following:
Commercial rationale. The transaction must have a genuine commercial purpose — not merely a paper structure designed to generate an invoice and a VAT claim.
Payment terms. Payment terms must be commercially justifiable. Where payment is made to a third party rather than directly to the supplier, or to a bank account in a country outside the supplier’s home country, a documented commercial explanation is required and must be retained.
Cash payments. Payments made in cash must have a clear documented commercial reason. UAE trading companies that routinely pay suppliers in cash should review every such arrangement before 1 October 2026 and prepare documentation justifying why cash was used rather than an electronic transfer. This is not a prohibition — cash payments remain legal. It is a documentation requirement.
Price and margin. The price paid for the supply and the profit margin in the transaction must not be inexplicably out of line with market rates. The Decision does not set a specific tolerance — it requires the business to be able to justify the pricing if asked.
Activity consistency. The goods or services received must fall within the supplier’s normal licensed activity. A company licensed for garment trading should not be issuing invoices for IT consultancy services.
Origin and ownership of goods. Where physical goods are received, the business must be able to verify the origin and chain of ownership of those goods.
Intermediary transparency. Where a supplier is acting as an intermediary — rather than the original manufacturer, service provider, or owner — there must be a clear, documented commercial reason for their role in the supply chain.
Documentation and Governance — What the FTA Actually Wants to See
FTA Decision No. 13 of 2026 does not simply require businesses to perform verification checks — it requires documented proof that those checks were performed, retained in a form the FTA can review on request. The distinction matters: completing the checks without documentation provides no protection during an FTA audit.
Article 5 of FTA Decision No. 13 of 2026 sets out the documentation and governance requirements:
Verify on first engagement. Every new supplier must be verified before the first supply is received. There is no grace period for existing supplier relationships that have not previously been subject to formal verification.
Re-verify every 12 months. Supplier verification must be refreshed for every active supplier at least once every 12 months, regardless of whether anything has changed in the relationship. A supplier used continuously since 2020 who has never been formally verified must be verified before 1 October 2026 — and then again within 12 months.
Retain all supporting records. Identity documents, incorporation certificates, address confirmation records, meeting notes, payment justifications, and risk indicator assessments must all be retained and organised so the FTA can review them on request. The Decision does not specify a retention period — the standard UAE seven-year record-keeping requirement under Federal Decree-Law No. 47 of 2022 applies.
Maintain a written verification policy with a named responsible individual. This is the requirement that most finance teams will overlook — and the one an FTA inspector will request first. Article 5(4) of FTA Decision No. 13 of 2026 requires every taxable person to maintain a written policy that names the specific person or team responsible for running, reviewing, and supervising the supplier and supply verification process, with their roles clearly defined.
This is not an internal best practice recommendation. It is a mandatory document under the Decision. A business that has performed all the supplier checks correctly but has no written policy designating who is responsible will be in breach of Article 5(4) from 1 October 2026. For Al Arabiya Group clients, we draft and file this policy as part of the compliance support package — contact us via our tax and accounting services page.
What a Valid Tax Invoice Now Covers — and What It No Longer Does
The relationship between a valid tax invoice and input VAT recovery has changed.
Before 1 October 2026: A valid UAE tax invoice — issued by a VAT-registered supplier, containing the required elements under Article 59 of the UAE VAT Executive Regulations, and connected to a supply used for taxable purposes — was sufficient documentation to support an input VAT deduction. Subject to standard conditions, the invoice was the primary evidence the FTA required.
From 1 October 2026: A valid tax invoice remains a necessary condition for input VAT recovery. It is no longer a sufficient condition. Under FTA Decision No. 13 of 2026, a business must additionally demonstrate that it verified the supplier and the supply in accordance with the Decision’s requirements before the deduction is valid.
The consequence of this shift is direct and financial. If the FTA audits a business and finds that input VAT was claimed on a supply where the required verification was not performed and documented, the FTA has the authority under Article 54 bis to deny that input tax recovery. The denied amount — which may include the full VAT on one or more supplies — becomes an additional cost the business must absorb, and it may attract interest under Cabinet Decision No. 129 of 2025 at 14% per annum on the outstanding balance. For trading companies with high VAT input volumes, the cumulative exposure from a single audit covering a multi-year period can be material.
The practical implication is straightforward: the invoice file is no longer the complete compliance file. Every input VAT claim now needs a parallel supplier verification record to stand behind it.
See our article on UAE VAT penalties for the full breakdown of interest rates and late payment penalties that can compound on denied input tax claims.
Seven-Step Readiness Checklist
Your 7-Step Readiness Checklist Before 1 October 2026
The following actions cover the minimum required to be compliant with FTA Decision No. 13 of 2026 from its effective date. Each action corresponds to a specific obligation under the Decision.
Step 1 — List all active suppliers and screen against the thresholds.
Pull your accounts payable ledger and calculate rolling 12-month cumulative spend per supplier. Flag every supplier where cumulative spend has exceeded or is expected to exceed AED 100,000. Flag separately every supplier above AED 375,000. These are your priority verification cases — they require full Article 3 and Article 4 compliance before 1 October 2026.
Step 2 — Collect or refresh identity and incorporation documents for flagged suppliers.
For individual suppliers above the AED 100,000 threshold, obtain a copy of a valid Emirates ID or passport and schedule a meeting — in person or by video. For company suppliers, obtain a certificate of incorporation and identity documents for the authorised representative. Where existing files are more than 12 months old, treat them as unverified and restart the process.
Step 3 — Confirm each supplier’s place of business.
For every flagged supplier, verify that their registered address corresponds to a genuine place of business. An electronic search using the UAE Ministry of Economy company registry, Emirati NBD’s business verification tools, or an equivalent official database is acceptable. Where there is any doubt, a site visit is the safest option.
Step 4 — Review payment methods and prepare documentation for non-standard arrangements.
Identify any supplier payments made in cash, to third-party accounts, or to bank accounts in countries outside the supplier’s base of operations. For each, prepare a written commercial justification explaining why the arrangement exists. File this alongside the supplier’s verification records.
Step 5 — Check risk indicators for all flagged suppliers.
Review whether any flagged supplier has changed its registered address or key personnel more than twice in the past 12 months, and whether its invoiced volumes are proportionate to its apparent size. Where a red flag applies, document your assessment and the commercial explanation for continuing to trade with the supplier.
Step 6 — Draft the written verification policy required by Article 5(4).
Create a written document that names the individual or team in your organisation responsible for conducting, reviewing, and supervising supplier and supply verification. The policy should specify the process they follow, the records they maintain, and how often they review existing supplier files. This document must exist before 1 October 2026 — it is the first document an FTA inspector will request.
Step 7 — Brief your procurement and accounts payable teams.
Supplier onboarding in your business must now include verification steps as a standard gate before a first invoice is approved for payment. Brief the relevant teams on the identity, address, and risk indicator checks required under Article 3, and the commercial rationale and payment term checks required under Article 4. Document that the briefing took place.
For businesses that need support completing Steps 1 through 7 before the deadline, Al Arabiya Group’s tax and accounting services team can conduct the supplier file review, draft the written policy, and confirm your compliance position before 1 October 2026.
Frequently Asked Questions — UAE VAT Supplier Verification Rules 2026
FTA Decision No. 13 of 2026 is a Federal Tax Authority decision issued on 22 July 2026, effective 1 October 2026, that sets out the specific measures, procedures, and conditions UAE businesses must follow to verify their suppliers and the supplies they receive before deducting input VAT. It implements Article 54 bis of the UAE VAT Law, which was inserted by Federal Decree-Law No. 16 of 2025 and gives the FTA the authority to deny input tax recovery where a supply forms part of a chain connected to tax evasion.
Yes. Free zone companies registered for VAT in the UAE are subject to the UAE VAT Law in the same way as mainland companies. FTA Decision No. 13 of 2026 applies to every VAT-registered taxable person in the UAE, regardless of whether they operate from a free zone or on the mainland. Free zone status does not create an exemption from UAE federal tax obligations.
Under FTA Decision No. 13 of 2026, a business may skip the supplier and supply verification measures for a supply with a value below AED 10,000 excluding VAT — but only if total cumulative supplies from that same supplier over the previous 12 months do not exceed AED 100,000. Once cumulative spend with a single supplier crosses AED 100,000, full verification is required for all their supplies regardless of individual invoice size.
The Decision itself does not set a fixed administrative penalty for non-compliance. The consequence of non-compliance is that the FTA may treat a business as having known or reasonably should have known that a supply was connected to tax evasion under Article 54 bis of the VAT Law, and deny the input VAT recovery on that supply. The denied VAT becomes an additional cost to the business and may attract late-payment interest at 14% per annum under Cabinet Decision No. 129 of 2025.
Under Article 5 of FTA Decision No. 13 of 2026, supplier verification must be repeated if more than 12 months have passed since the supplier was last formally verified. This applies to all active supplier relationships, including long-standing ones. A supplier you have worked with for five years who has never been formally verified under the Decision’s requirements must be verified before 1 October 2026.
No — not on its own. A valid tax invoice remains a necessary condition for input VAT recovery, but from 1 October 2026 it is no longer sufficient. Under FTA Decision No. 13 of 2026, businesses must also have documented evidence of supplier and supply verification in accordance with Articles 3, 4, and 5 of the Decision. See the full explanation in the section above on what a valid tax invoice now covers and what it no longer does.