UAE Business Rules Starting October 1: What Companies Need to Know About Supplier Verification and VAT

Starting October 1, 2026, businesses operating in the UAE face a significant shift in how they manage supplier relationships. A valid tax invoice is no longer enough to secure a VAT refund — companies must now actively verify every supplier and the supplies they receive, or risk losing their right to recover input VAT entirely.

The Federal Tax Authority (FTA) has issued FTA Decision No. 13 of 2026, which sets out mandatory supplier verification and supply due diligence requirements for all VAT-registered businesses in the UAE. The rules take effect on October 1, 2026, and the preparation window is narrow.

This article explains what the new UAE VAT compliance rules require, which businesses are affected, what the key thresholds mean in practice, and what your team needs to do before the deadline.

Where These Rules Come From

The October 2026 supplier verification requirements stem from changes introduced by Federal Decree-Law No. 16 of 2025, which amended the UAE VAT Law and inserted a new provision — Article 54(bis) — giving the FTA the authority to deny input tax recovery where a supply forms part of a chain connected to tax evasion.

That amendment took effect on 1 January 2026. What FTA Decision No. 13 of 2026 does is answer the practical question it left open: what exactly does a business need to do to show it acted in good faith before claiming input VAT? The decision sets out specific verification steps, thresholds, documentation requirements, and governance obligations that every taxable person in the UAE must now follow.

The core change: holding a valid tax invoice used to be enough to recover input VAT. From October 1, businesses must also prove they verified their supplier and that the transaction was legitimate before they can make that claim.

What Changed — and Why It Matters for Your VAT Refund

Under the UAE’s VAT system, businesses can recover the VAT they paid on purchases — known as input VAT — by offsetting it against the VAT they collect from customers. For most businesses, this recovery has been straightforward: hold a valid tax invoice, file your return, and the credit or refund follows.

The new rules change that dynamic. From October 1, 2026, the FTA has the power to withhold VAT refunds from businesses whose purchases are connected to tax evasion anywhere in the supply chain. Critically, your business does not need to be the one evading tax. If the FTA determines that your supplier — or a supplier further up the chain — was involved in evasion, and that you knew or reasonably should have known, your input VAT recovery can be denied.

This places a direct compliance burden on buyers. Verifying the legitimacy of your suppliers and the supplies you receive is no longer a best practice — it is a documented legal requirement tied directly to your ability to recover VAT.

Who Must Comply with the New UAE Supplier Verification Rules

The decision applies to every taxable person under the UAE VAT Law — meaning any business that is registered for VAT, or is required to be registered. There is no exemption based on company size, industry, or structure. Whether you are a mainland LLC, a free zone entity, or a branch of a foreign company, if you are VAT-registered and claim input tax on supplies received from third-party suppliers, these rules apply to you.

The decision does build in monetary thresholds that determine how much verification work is required for different supplier relationships. Low-value, infrequent purchases carry a lighter burden. Ongoing or high-value relationships require full documentation. The thresholds are covered below.

The Two Checks Every Business Must Carry Out

FTA Decision No. 13 of 2026 structures its requirements around two distinct types of verification: checking the supplier and checking the supply. Both must be completed and documented before input VAT can be deducted on a transaction.

1. Supplier Verification

Before relying on input VAT from a new supplier — or from an existing supplier who has not been verified in the past 12 months — your business must confirm the following:

• Identity: For individuals, a valid Emirates ID or passport, plus an in-person or virtual meeting before the supply is made. For companies, verified incorporation documents matched against official databases, along with identity documents for the authorised representative.
• Address and place of business: Confirmed through electronic checks or a site visit, showing the supplier has a genuine, active place of business consistent with their activities.
• Risk indicators: The supplier should not have changed address or key personnel more than twice in the past 12 months, and their transaction volumes should be proportionate to their size and business history.
• Bank account confirmation and reputation check: Required where annual supplies from that supplier exceed, or are expected to exceed, AED 375,000. This means a written bank confirmation and a review of publicly available information about the supplier’s reputation.

2. Supply Verification

For each taxable supply received, businesses must also confirm that the transaction itself is legitimate. This includes checking that:

• The transaction has a genuine commercial rationale — not just paperwork
• Payment terms are commercially justifiable, with third-party or overseas payments clearly documented
• Payments are made electronically where possible; cash payments require a documented reason
• Prices and profit margins are not unexplainably out of line with the market
• The goods or services fall within the supplier’s normal licensed business activity
• The origin and ownership of goods can be verified where relevant
• Where a supplier acts as an intermediary, there is a clear commercial rationale for their role in the chain

The Three Thresholds That Determine Your Obligations

The decision builds in a tiered structure so that small, one-off purchases carry a lighter compliance burden than ongoing or high-value supplier relationships. Three thresholds determine exactly what is required:

In practice, most active business-to-business relationships will cross the AED 100,000 annual threshold without difficulty. For the majority of UAE businesses, full verification will be the norm, not the exception.

Documentation and Internal Governance Requirements

The FTA does not just require that checks are performed — it requires documented proof that they were carried out correctly and that a structured process exists behind them.

Under Article 5 of the decision, businesses must:

• Verify each new supplier before the first transaction, and re-verify any existing supplier not checked within the past 12 months
• Verify every taxable supply received against the Article 4 criteria
• Retain supporting records in a format the FTA can review on request
• Maintain a written verification policy that names the people responsible for running, reviewing, and supervising the process, with roles clearly defined

That last requirement matters for internal accountability. The FTA expects a named, documented process — not informal checks carried out on a case-by-case basis.

Key Dates for UAE Businesses

What to Do Before October 1

The practical workload for most finance and procurement teams involves three things: auditing your existing supplier list, collecting the right documentation, and building a process that runs on a 12-month cycle going forward.

Start by identifying every active supplier and flagging those whose annual transaction value exceeds AED 100,000 or AED 375,000. Those are the relationships that need immediate attention. For each flagged supplier, collect or refresh identity documents, confirm their place of business is consistent with their invoiced activities, and document any payment arrangements that fall outside standard electronic transfers.

Once your existing supplier files are in order, draft a written verification policy that names the team or individual responsible for ongoing compliance. Brief your procurement and accounts payable staff on what the new documentation requirements mean for their day-to-day processes, and set calendar reminders for the 12-month re-verification cycle so that ongoing supplier relationships do not lapse without a refresh.

Supplier due diligence is no longer a one-time onboarding exercise. Under the new UAE VAT compliance rules, it is a continuous, documented process with a mandatory 12-month renewal cycle for every active supplier relationship.

Frequently Asked Questions

Does this apply to all VAT-registered businesses in the UAE?

Yes. There is no exemption based on business size, industry, or legal structure. Every taxable person under the UAE VAT Law is required to comply. The depth of verification required scales with transaction volume, but the obligation itself applies universally.

What happens if a business does not verify its suppliers?

Failing to carry out the required checks means your business may be treated as having known — or reasonably should have known — about a tax evasion link in your supply chain. In that case, the FTA can permanently deny input VAT recovery on the related supplies. There is no automatic penalty for missing a verification step, but the financial exposure from losing VAT recovery rights is significant.

Do I need to verify every supplier invoice?

Not for every individual transaction. Purchases below AED 10,000 per invoice are generally exempt from verification — but only if total annual spending with that supplier stays below AED 100,000. Once the AED 100,000 annual threshold is crossed, full verification applies to all transactions with that supplier, regardless of individual invoice size.

How often do I need to re-verify existing suppliers?

Every 12 months, even for long-standing supplier relationships. If a supplier has not been verified within the past year, they must be re-verified before you can rely on input VAT from their transactions.

Is a valid tax invoice still enough to claim input VAT?

No. A valid tax invoice remains a basic requirement, but it is no longer sufficient on its own. Businesses must also have documented evidence showing they verified the supplier and the supply in line with FTA Decision No. 13 of 2026 before the input VAT deduction can be made.

What is the extra verification needed for suppliers above AED 375,000?

Suppliers from whom you receive more than AED 375,000 in a rolling 12-month period require additional checks: a written confirmation of their bank account details and a review of publicly available information about their business reputation. These checks sit on top of the standard supplier verification requirements.

The Bottom Line

The new UAE supplier verification rules represent a meaningful shift in how VAT compliance works for businesses operating in the country. For the first time, buyers have a documented legal obligation to check the legitimacy of their suppliers and their transactions — and to prove they did so if the FTA asks.

The consequences of getting this wrong extend beyond administrative penalties. Businesses that cannot demonstrate proper supplier verification risk losing the right to recover input VAT permanently on affected transactions — a material financial exposure for any VAT-registered company with regular purchasing activity.

October 1 is close. If your business has not yet reviewed its supplier list, updated its documentation, or assigned responsibility for an ongoing 12-month verification cycle, now is the time to start.