UAE Enforces Stricter Input VAT Recovery Rules from October 2026

UAE tax authorities have made major operational updates to input VAT recovery standards that took effect on 1 October 2026. The new regime shifts compliance from invoice holding to active verification under FTA Decision No. 13 of 2026, FTA Decision No. 17 of 2026, and Cabinet Decision No. 149 of 2026. The standard VAT rate remains at 5% and registration thresholds remain unchanged, according to tax advisory firm A&A Associate.

Under FTA Decision No. 13 of 2026, businesses must conduct and document identity and operational background checks on suppliers upon engagement and renew them every 12 months. For purchases exceeding AED 375,000 across 12 months, firms must verify the supplier's UAE bank account details and public reputation. Exceptions apply to transactions under AED 10,000, provided cumulative purchases from that supplier do not exceed AED 100,000 over 12 months. Businesses must maintain documented policies designating who performs and oversees these checks.

Under FTA Decision No. 17 of 2026, VAT recovery on staff benefits is restricted to six specific categories: transport, remote-area food and drink, operational staff accommodation, temporary accommodation for new joiners up to 30 days, mobile phone and data usage, and parking. Each category carries mandatory conditions, and options offering employees a cash alternative disqualify the benefit from VAT recovery.

Cabinet Decision No. 149 of 2026 amends the VAT Executive Regulations to disallow VAT recovery on large purchases settled in cash once the government designates the specific monetary threshold. Monthly filers are required to apply these updated verification and recovery rules starting with their October returns, which are due by 28 November.