UAE’s Federal Tax Authority has clarified how taxable persons should verify the validity and integrity of supplies before deducting input tax, ahead of new rules taking effect on 1 October 2026.
The United Arab Emirates (UAE) Federal Tax Authority has published VAT Public Clarification VATP048, setting out the verification requirements under Federal Tax Authority Decision No. 13 of 2026. The decision was issued on 22 July 2026 and took effect on 1 October 2026.
The clarification explains that taxable persons are generally eligible to recover input tax incurred to make taxable supplies, provided the relevant conditions are met. However, under Article 54(bis)(2) of the VAT Law, the authority may reject the deduction of recoverable input tax in cases of tax evasion if the taxable person “should have been aware” that the supply was part of a supply or a chain of supplies related to tax evasion.
The decision applies only where the authority has established that tax evasion occurred. Taxable persons are not required to apply the measures to every supply received. However, the authority says incorporating them into normal business processes can provide documentary evidence that the taxable person was unaware, and could not be expected to be aware, of the tax evasion. Where tax evasion is established and the taxable person was not actually aware of it, the person will not be considered to have “should have been aware” if it proves compliance with the decision.
Supplier verification
A taxable person must verify a supplier when dealing with it for the first time, or where a recurring supplier has not been verified over the previous 12 months.
- Natural person: The taxable person must obtain valid proof of identity, such as an Emirates ID or passport, and meet the supplier in person or virtually before the supply is made.
- Legal person: The taxable person must verify the supplier’s incorporation through official databases or a certificate of incorporation or trade licence. The incorporation details must be valid and identical to the entity’s name, address and employees. The taxable person must also obtain valid proof of identity of the director, agent or employee authorised to represent the supplier.
- Place of business: For both types of supplier, the taxable person must verify that an actual place of business exists, using electronic means or a field visit, and that it is compatible with the nature of the supplier’s activities.
- Risk level: The taxable person must ensure that none of the listed risk indicators applies. These include changing address or key employees more than twice over the previous 12 months, and undertaking transactions that are disproportionate or unexpected compared with the size and history of the business. Where an indicator applies, the taxable person must retain a clear and justified explanation and submit it to the authority upon request.
Where supplies from the same supplier exceed AED 375,000 over the previous 12 months, or are expected to exceed that amount over the next 12 months, two additional requirements apply. The taxable person must obtain written confirmation from an authorised bank in the UAE that the supplier holds a bank account, and must review publicly available reviews and media coverage from reliable sources.
Supply verification
The taxable person must also verify each taxable supply received or accepted. This includes:
- a general assessment, ensuring the supplier’s engagement in the transaction is based on genuine commercial reasons;
- an assessment of payment conditions, where the payment method must be commercially justifiable and a reasonable commercial explanation is needed if a third party is involved or payment goes to a bank account outside the supplier’s country of incorporation;
- payment of consideration by electronic means, with any cash payment based on a documented commercial reason, within the thresholds set by tax legislation and easily verifiable; and
- verification of the supply’s circumstances, including that prices or profit margins are not commercially unjustifiable or significantly different from market conditions, that the supply falls within the supplier’s ordinary or licensed activities, and that the supplier has valid ownership of, or the right to dispose of, the goods. Where the supplier acts as an intermediary, there must be a clear and justifiable commercial explanation for its role.
The clarification notes that the thresholds for cash payments will be specified by a decision issued by the Minister of Finance.
Exception and record-keeping
A taxable person may disregard the verification of taxable supplies where the consideration, excluding VAT, is less than AED 10,000. This exception does not apply where the total value of supplies from the same supplier exceeds AED 100,000, excluding VAT, over the previous 12 months or is expected to exceed that amount over the next 12 months.
Taxable persons must document the verification steps taken and retain supporting documents and records that enable the authority to verify the correctness of their implementation. They must also maintain a documented policy identifying the persons in charge of implementing, reviewing and supervising the verification procedures, and clearly setting out their powers and responsibilities.
The Federal Tax Authority says the public clarification states its position and neither amends nor seeks to amend any provision of the relevant legislation, including Federal Decree-Law No. 8 of 2017 on Value Added Tax.
