UAE Federal Tax Authority Introduces Stricter VAT Supply Chain Rules

The UAE Federal Tax Authority is introducing stricter Value Added Tax (VAT) regulations taking effect on October 1, according to Arabian Business. Under the updated framework, tax authorities possess legislative authority to deny input VAT refund claims if goods or services involved in a transaction are linked to tax evasion at any stage in the supply chain.

The authority is implementing a 'should have known' standard. As a result, companies can no longer rely on claims of lack of awareness to safeguard their input VAT deductions.

To mitigate potential financial losses, businesses are advised to execute comprehensive supplier verifications every 12 months. Recommended compliance steps include examining trade licenses, verifying authorised signatories, confirming physical operations, documenting commercial rationale, and retaining detailed audit records for all taxable supplies.