What the new FTA Decision No.13 of 2026 means for input VAT recovery and transactions over AED 10,000
Here is a question every UAE business will soon need a clear answer to: if the Federal Tax Authority asked you to justify an input VAT deduction, could you show not just that you hold a valid invoice, but that the supplier was real and the transaction genuine?
From 1st of October 2026, that will be the standard. The Federal Tax Authority Decision No.13 of 2026 is introducing enhanced supplier and transaction verification requirements on a simple premise, that a valid invoice is no longer the end of enquiry.
For finance, procurement, tax and legal teams, the practical shift is that due diligence which may once have been informal, now has become a documented, repeatable control.
What has changed
The decision applies to taxable persons registered, or required to be register, for UAE VAT. Before deducting input tax, the recipient must verify two things
- The identity and legitimacy of the supplier; and
- The commercial and factual circumstances of the supply itself.
The recipient must be able to demonstrate that the transaction is genuine, commercially justified, properly priced, connected to the supplier’s licensed activities and supported by reliable records.
There is a limited exception where the consideration for a supply, excluding VAT, is below AED 10,000. This is narrower than it appears.
The exception only applies to genuine low value transactions which fall under the threshold of AED 10,000, if you deal with the same supplier, and the total value of the same supplier exceeds, or is expected to exceed, AED 100,000 across the preceding or following twelve-month period, the allowance disappears. It is a threshold for individual low-value supplies, not a blanket exception therefore businesses dealing repeatedly with the same counterparty should not rely on it.
What is required to verify the Supplier
Verification will be required whenever a business deals with a supplier for the first time, or where the supplier has not been verified in the preceding twelve months. For corporate suppliers, this goes well beyond just collecting the trade license. The recipient must verify the incorporation through official database or a certificate, confirm those details against the supplier’s name, address and workforce, and identify the individual authorised to represent by obtaining a valid Emirates ID or passport for that person.
It must also satisfy that the supplier has a genuine place of business, either electronically or a site visit where warranted. The premises should fit the nature of its activity.
Incorporation documents cannot be read in isolation, all the requirements mentioned above should reasonably line up with the transaction in question.
If the supplier is a natural person, the requirements are lighter and include valid proof of identity, and a meeting (virtual or in person) before the supply is made.
The onboarding process should distinguish between the two rather than apply generic checklist.
Verifying the transaction
Alongside the supplier, each taxable supply must be assessed on its own terms. That assessment looks at the purpose of the purchase, rational for engaging a particular supplier, whether the goods or service were in fact received, whether the transaction is consistent with the recipient’s own activities, and whether the supplier’s role is commercially explainable, and the pricing sits within market norms.
In practice, this is where providing just an invoice alone looks thin. A defensible file will connect that invoice to the surrounding commercial record such as purchase order, engagement letter or contract, the delivery note, or completion certificate.
Payment, pricing and the AED 375,000 threshold
Payment methods must be commercially justifiable. Where a third party makes or receives payment or funds go to another account outside the supplier’s country of incorporation, the recipient should hold a reasonable explanation supported by evidence.
Generally, payments should be electronic as they leave a clear trail. In the event that payment is made by cash it will need to be supported by documented commercial reasons and must be easily verifiable.
To put it simply – pay in a normal, reasonable way, and if you do something unusual, be able to explain why.
Pricing also attracts scrutiny, any significant departure from market conditions should carry a clear explanation such as unusual specifications, urgency, scarcity or specialised expertise.
Larger relationships attract an additional layer to all of this. Where supplies from a single supplier exceed, or are expected to exceed, AED 375,000 over a twelve-month period, the recipient must obtain written confirmation from an authorised UAE bank that the supplier maintains a bank account, and that it has no relevant reservations attached (meaning no red flags or conditions on the account). This bank confirmation doesn’t need to be addressed to the recipient, it is simply to prove the supplier holds a valid bank account.
Practical Affects in Business
Perhaps the most consequential requirement is that the verification process itself must be documented. Verification becomes a governance matter as informal checks are not enough if the organisation cannot later show what was checked, when, by who and on what basis it was approved.
For legal teams, the decision reaches into advisory and compliance. Clients will need help building the verification process the decision requires – : onboarding checklist, the mandatory written policy, escalation rules for risky suppliers and record- retention agreements.
If we also look at supplier and consultant agreements these should now be drafted so the client can actually satisfy these checks, accurate licensing representations, confirming signatory’s authority, warranties about the payment account and notice of any change to it, delivery/acceptance evidence, right to request documents and cooperation with FTA audits
The bottom line
FTA Decision No 13. of 2026 raises the bar for what a taxable person must show before deducting input VAT or when dealing with a transaction above the AED 10,000 threshold: it is not enough merely that an invoice exists, but that the supplier has to be genuine, the transaction commercially justified, and the goods or services are within the supplier’s legitimate activities. The final test is a simple one: if the FTA asked, could the business explain its verification of a given supplier and transaction from the records it holds?
