UAE Implements Mandatory VAT Supplier Due Diligence Rules for Input Tax Deductions

Federal Tax Authority (FTA) Decision No. 13 of 2026 entered into force on October 1, 2026, establishing mandatory supplier due diligence rules as a formal VAT compliance control for taxable businesses in the United Arab Emirates. The decision implements Article 54 bis of the UAE VAT Law, which was introduced under Federal Decree-Law No. 16 of 2025.

Under this statutory framework, the FTA is empowered to deny input VAT recovery if a commercial transaction is linked to a supply chain involving tax evasion and the taxable entity knew or reasonably should have known of the connection. Inadequate verification directly exposes companies to the forfeiture of input tax deductions, according to legal analysis from law firm NZP NAGY LEGAL.

The onboarding framework requires businesses to verify vendors prior to initial transactions and re-evaluate them if no review has taken place within the preceding 12 months. Mandatory checks include reviewing identification documents, verifying official incorporation registers, confirming representative authority, and documenting checks on physical operating premises. For vendors whose transactions exceed or are projected to exceed AED 375,000 over a 12-month period, companies must secure confirmation of a UAE bank account and review public records regarding business standing.

At the transaction level, entities must confirm commercial rationale, valid pricing, alignment with licensed commercial activities, and clear records of goods origin and title. Payments should generally be executed electronically, with cash payments requiring formal documentation. While supplies under AED 10,000 qualify for a de minimis exemption, this relief ceases once cumulative annual purchases from a single supplier reach AED 100,000.