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UAE Imposes Stricter VAT Due Diligence Requirements for Input Tax Recovery

The UAE Federal Tax Authority has introduced Decision No. 13 of 2026, requiring businesses to execute and document specific checks on suppliers and individual transactions before claiming input VAT deductions. Taking effect on 1 October 2026, the regulation implements Article 54 bis of the UAE VAT Law to prevent tax evasion across supply chains. Compliance rules introduce specific rolling 12-month transaction thresholds of AED 100,000 and AED 375,000.

Issuing authority
Federal Tax Authority
Jurisdiction
United Arab Emirates
Publication date
September 30, 2026
Effective date
October 1, 2026
Stage
Final rule
Official document
Federal Tax Authority Decision No. 13 of 2026 / Federal Decree-Law No. 16 of 2025
Official source
www.nzp.de

Businesses operating in the United Arab Emirates must implement and record formal verification procedures before deducting input VAT, according to legal analysis from law firm NZP NAGY LEGAL. Federal Tax Authority (FTA) Decision No. 13 of 2026 enters into force on 1 October 2026, establishing a mandatory due diligence framework for both vendors and discrete commercial transactions.

The decision implements Article 54 bis of the UAE VAT Law, introduced under Federal Decree-Law No. 16 of 2025. Under this statutory rule, the FTA is authorized to deny input VAT recovery if a transaction is connected to a supply chain involving tax evasion and the taxable person knew or reasonably should have known about the link. Inadequate verification exposes companies directly to the denial of tax deductions.

Under the new supplier onboarding rules, a vendor must be verified prior to the initial transaction and re-evaluated if no review occurred within the preceding 12 months. Verification includes reviewing identification, checking official incorporation registers, confirming representative authority, and verifying physical operating premises. For vendors whose transactions exceed or are projected to exceed AED 375,000 over 12 months, companies must obtain confirmation of a UAE bank account and review public records regarding business standing.

For individual transactions, businesses must confirm commercial rationale, valid pricing, alignment with licensed commercial activities, and documentation of goods origin and title. Payments should generally be electronic; cash transactions require documented explanations. While a de minimis exemption applies to supplies under AED 10,000, that relief ceases once cumulative annual purchases from the same supplier reach AED 100,000.

Sources

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