Navigating the UAE's New Input Tax Compliance Rules

The Federal Tax Authority (FTA) in the UAE has officially issued Decision No. 13 of 2026, introducing mandatory measures, procedures, and conditions that Taxable Persons must follow to verify the validity and integrity of supplies before deducting Input Tax.

Coming into effect on October 1, 2026, this decision establishes a stringent framework designed to safeguard the tax system and combat tax evasion. Here is what businesses need to know to stay compliant.

What Does Decision No. 13 of 2026 Require?

Under the framework of Article 54(bis) of the VAT Law, businesses can no longer treat supplier verification as a casual administrative task. To successfully claim Input Tax deductions, taxable persons must perform comprehensive checks across two primary areas: Supplier Verification and Supply Verification.

1. Verifying the Supplier (Article 3)

Businesses must thoroughly vet who they do business with, differentiating between natural and legal persons:

  • For Natural Persons: Obtain a valid proof of identity (Emirates ID or passport) and meet the supplier in person or virtually before the supply occurs.

  • For Legal Persons: Verify corporate status through official databases or incorporation certificates, ensuring details match name, address, and employees. You must also verify the identity of the authorized director or representative via valid identification documents.

  • Address & Business Substance: Confirm an actual place of business via electronic means or field visits, ensuring it matches the supplier’s licensed activities.

  • Risk Indicator Monitoring: Check for red flags, such as frequent address changes (>2 times in 12 months), high turnover of key personnel, or transactions disproportionate to the supplier’s history. If triggered, a justified explanation must be documented and ready for FTA review.

  • High-Value Thresholds (AED 375,000+): If supplies exceed or are expected to exceed AED 375,000 over a 12-month period, businesses must obtain a written bank confirmation from an authorized UAE bank and review reliable public feedback/media coverage to rule out tax evasion risks.

2. Verifying the Supply (Article 4)

Every single transaction must pass a commercial validity assessment:

  • Commercial Rationale: Ensure the engagement has genuine commercial reasons and justified payment conditions. Third-party routing or offshore payments outside the supplier’s country must have clear, logical explanations.

  • Payment Methods: Consideration should ideally be paid electronically. Cash payments must have documented commercial reasons, respect legal thresholds, and remain easily verifiable.

  • Pricing & Scope: Verify that profit margins and prices are market-consistent, goods/services fall within the supplier’s licensed commercial activity, and the ownership/origin of goods is authentic.

 

Are There Any Exceptions? (Article 6)

Yes, businesses are exempt from applying these specific verification measures if the consideration (exclusive of VAT) for a taxable supply is less than AED 10,000.

However, this exception does not apply if the total value of supplies received from that specific supplier exceeds AED 100,000 over the previous or next 12 months.

Action Plan for Businesses

To prepare for the October 1, 2026 effective date, organizations must implement the procedural mandates outlined in Article 5:

  1. Recurrent Verification: Re-verify suppliers at least once every 12 months.

  2. Documentation Trail: Maintain rigorous records of all verification steps and supporting documents for FTA inspection.

  3. Internal Governance: Draft and maintain a documented internal policy clearly defining who is responsible for supervising, implementing, and reviewing these verification procedures.

Proactive compliance now will protect your right to Input Tax deductions and shield your business from friction with tax authorities down the road.

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