Tax Update on FTA Decision No. 13 of 2026 for the purposes of implementing the provisions of Article 54(bis) of the VAT Law
The FTA Decision No. 13 of 2026 issued by the Federal Tax Authority, UAE, has set out the certain procedures and conditions that need to be followed by the taxable persons w.e.f. 01st October, 2026, to verify the validity and integrity of their supplier and the supplies received. The Decision strengthens the implementation of Article 54(bis) of the Federal Decree-Law No. 8 of 2017 i.e., the UAE VAT Law.
This Decision introduces additional compliance burden on registered business who recover and deduct input VAT. Now, business in UAE are expected to take some reasonable steps to verify the genuineness of their suppliers and the authenticity of the supplies received before any input VAT recovery. This decision forms part of the UAE's broader perspective to strengthen VAT compliance and address the risks of fraudulent input VAT recoveries and tax evasion.
Supplier Due Diligence
A taxable person is required to carry out specified verification checks when dealing with a supplier for the first time, or where the supplier has not been verified during the preceding 12 months:
1. Identity Verification:
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Where supplier is a natural person, a copy of a valid Emirates ID or passport should be obtained and meet the supplier physically or virtually.
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Where supplier is a legal person, verify the entity's incorporation details and confirm the identity of the authorised representative.
2. Place of Business Verification: Verify the existence of the supplier's actual place of business electronically or through a field visit and confirm that it is consistent with the supplier's activities.
3. Risk Assessment: Check whether the supplier has changed its address or key employees more than twice during the previous 12 months. Also verify if the supplier conducts transactions that are disproportionate to the size and volume or unusual to the activities as per its commercial licence. If any of such indicators exist, obtain and retain documented explanations.
4. Bank Account Verification: Where supplies exceed or are expected to exceed AED 375,000 over a 12-month period, obtain evidence of a maintaining a UAE bank account and review publicly available information and the supplier's business reputation.
Due Diligence Relating to Supplies
Taxable persons must also verify the validity and integrity of supplies received by:
5. The commercial rationale for the transaction and the supplier’s involvement.
6. The payment flow and method, with arrangements such as cash payments, third-party payments or payments to accounts outside the supplier’s country of incorporation requiring justification.
7. Whether the consideration is reasonable compared with prevailing market rates.
8. Whether the goods or services fall within the supplier’s licensed and ordinary business activities.
9. The ownership and origin of the goods supplied.
10. Where the supplier acts as an intermediary, whether there is a justifiable commercial explanation for its role in the supply process.
Exceptions
The verification requirements relating to supplies do not apply where the value of the supply is less than AED 10,000 (exclusive of VAT), unless the taxable person becomes aware of circumstances indicating potential risks concerning the validity or integrity of the supply. Taxable persons are therefore expected to apply enhanced verification procedures for higher-value transactions and transactions exhibiting risk indicators prescribed under the Decision
Conclusion
This Decision reinforces the importance of exercising appropriate due diligence when claiming input VAT. Businesses should therefore review their procurement processes, supplier onboarding procedures and tax governance controls to ensure that input VAT claims are properly supported and compliant with the applicable requirements. Strengthening these controls can help businesses identify potential risks at an early stage and reduce the risk of input VAT recovery being challenged during an FTA audit.