UAE Input VAT Recovery: A Tax Invoice Alone May No Longer Be Enough
Updated: 3 days ago
UAE Input VAT Recovery: A Tax Invoice Alone May No Longer Be Enough
From 1 October 2026, UAE businesses will face additional requirements before they can recover input VAT. A valid tax invoice will, of course, remain necessary—but it may no longer be sufficient on its own.
FTA Decision No. 13 of 2026 introduces new measures, procedures and conditions under Article 54 bis of the UAE VAT Law. Put simply, businesses will need to know who their suppliers are and be able to evidence the checks they have carried out.
This is effectively a “know-your-supplier” requirement for VAT purposes. It moves the focus beyond the formal wording of an invoice and onto the supplier, the payment and the commercial background of the transaction.
What will businesses need to check?
Businesses will need to verify the supplier’s identity, legal incorporation and actual place of business. They must also consider whether there are any red flags which should have prompted further enquiries. These may include frequent changes to the supplier’s address, ownership or key personnel. Questions may also arise where the size or nature of a transaction does not appear consistent with the supplier’s business, experience or operating history.
The point is not simply to collect another set of documents for the file. A business must consider the information available to it and follow up where something does not look right. If the FTA subsequently reviews an input VAT claim, the business should be in a position to show what checks were carried out, when they were completed and how any concerns were addressed.
Bank account details must also be verified
Where annual supplies from a supplier exceed AED 375,000, the supplier’s bank account details must be verified. This is particularly relevant where payment instructions change during an existing business relationship. Updated bank details should not simply be accepted by email and processed without further checks. The change should be independently confirmed and the confirmation properly documented.
Finance and accounts-payable teams will therefore need to be closely involved. Supplier due diligence cannot sit with only one department if another department controls the actual payment.
Does the transaction make commercial sense?
The new requirements also go beyond checking corporate documents and bank details. Businesses must consider the transaction itself. Is the price commercially reasonable? Is the payment method normal for this type of transaction? Is there a proper business reason for purchasing the relevant goods or services from this supplier?
Unusual pricing, payments to third parties, unexplained cash arrangements or transactions which do not fit the supplier’s normal activities may require further enquiries. The practical question is a simple one: does the transaction make sense, and can the business show that it considered this before recovering the input VAT?
The exemption for smaller supplies is limited
There is an exemption for supplies below AED 10,000. However, it is narrower than it may first appear.
The exemption falls away where the total value of supplies from the same supplier exceeds AED 100,000 during the previous 12 months or is expected to exceed AED 100,000 during the following 12 months.
Businesses cannot therefore look at each invoice in isolation. They will need to monitor the overall value of supplies received from each supplier. A supplier issuing regular invoices below AED 10,000 may still fall within the new requirements once the cumulative value crosses, or is expected to cross, the AED 100,000 threshold.
What should businesses do before 1 October?
Businesses should not wait for the first FTA review to discover that their supplier files are incomplete.
As a first step, existing supplier-onboarding procedures should be reviewed and, where necessary, updated. Companies should make sure that they hold current incorporation and licence documents, verified contact and address details, and sufficient information to understand the supplier’s ownership and business activities.
They should also introduce a clear process for:
Identifying and following up on supplier risk indicators;
Verifying bank account details where the AED 375,000 threshold is reached;
Monitoring the cumulative value of supplies from each supplier;
Reviewing unusual pricing, payment methods or transaction structures;
Recording the commercial rationale for higher-risk transactions; and
Keeping evidence of the checks and approvals in an organised supplier file.
Responsibility must also be clear. Procurement, finance, tax, compliance and accounts-payable teams may each hold part of the relevant information. The business must ensure that these functions work together before the input VAT is claimed.
The supplier file will be key
In an FTA review, saying that the supplier was known to the business or had been used for many years may not be enough. The relevant checks should be documented. The file should show what was reviewed, who reviewed it, when the review took place and what was done about any concerns identified. This may include corporate documents, licences, bank account confirmations, contracts, completed due diligence forms and internal approvals.
Businesses should also remember that supplier due diligence is not necessarily a one-off exercise. Information can change. Higher-risk suppliers and material relationships should be reviewed periodically, particularly where there are changes to ownership, management, business activities, address or payment instructions.
The message is clear: from 1 October 2026, the right to recover input VAT will increasingly depend not only on holding a valid tax invoice, but also on being able to demonstrate proper supplier due diligence. Now is the time for businesses to review their procedures and ask a straightforward question: would their supplier files withstand an FTA review?
