Guide · updated 02.09.2026 · 12 min read · Lucent Legal team

Input VAT in the UAE from 1 October 2026: Check Your Supplier or Pay the Tax Yourself

Your accountant filed the return, the input tax was recovered — and a year later an FTA auditor disallows it over a supplier you never met. From 1 October 2026 a tax invoice on its own no longer supports recovery: you need evidence that you checked the supplier and the supply. Here's who it hits, what to collect, and what silence costs.

Who this applies to: UAE VAT in two minutes

Anyone registered for VAT in the UAE, or required to register. The rate is 5%. Registration is mandatory once taxable supplies and imports over 12 months pass AED 375,000; from AED 187,500 you can register voluntarily.

The mechanics are short. VAT you charge customers is output tax, VAT you pay suppliers is input tax, and you remit the difference.

A denied recovery turns that 5% from pass-through money into your loss. Buy AED 2,000,000 of stock, pay AED 100,000 of VAT on top, lose the recovery, and you funded a hundred thousand dirhams out of your own margin.

VAT and corporate tax are separate duties with separate thresholds and returns. The wider picture for a company owner sits in the guide on taxes in the UAE for expats.

What changed: an invoice is no longer enough

The old chain — valid tax invoice, therefore recovery — worked almost automatically. Article 54 bis broke it: the FTA can refuse recovery where the supply forms part of a chain connected to evasion.

Refusal is mandatory where the buyer knew. It is discretionary where the buyer should have picked it up from the circumstances but ran no checks.

Decision No. 13 spells out what "should have known" means by listing the specific checks. Run them and document them, and you have an argument. Skip them, and the presumption runs against you.

From 1 October 2026: mandatory checks under FTA Decision 13/2026

From that date, recovery rests on a supplier file rather than on an invoice. Article 3 of the decision sets out what belongs in that file.

What to collect on each supplier

• Identity. For an individual: a copy of a valid ID (Emirates ID or passport) plus a meeting before the supply, in person or by video. For a company: registration checked against official records or a copy of the certificate, with name, address, and staff matching reality.
• Representative. The identity of the director, agent, or employee authorised to act for the supplier.
• Address and place of business. Confirm the office or warehouse exists, electronically or by visiting. The premises must fit the nature of the business.
• Risk indicators. Three of them, detailed below.
• Bank letter, once supplies pass AED 375,000. Unqualified written confirmation from a bank authorised in the UAE that the supplier holds an account there. It need not be addressed to you.
• Reputation, at the same threshold. A review of public feedback and media coverage from reliable sources.

The AED 375,000 threshold bites where supplies from that supplier passed the figure over the previous 12 months, or are expected to pass it over the next 12.

How often. At the first transaction with a supplier, and again whenever no check has been run in the previous 12 months. Each taxable supply is verified separately under Article 4.

What to keep. Copies of the documents, the date of each check, your written reasoning on any triggered indicator, and the verification policy required by Article 5 — naming the people who perform, review, and supervise the checks. It all lives with your other tax records.

You may already do parts of this — the baseline sits in our counterparty due diligence checklist. What changes is that the result now has to survive as a document for the tax authority.

The three risk indicators and what to do when one trips

The Article 3 indicators come with numbers attached:

1. The supplier changed address more than twice in the previous 12 months.
2. The supplier changed key people — managers, or the people you deal with — more than twice in the previous 12 months.
3. The supplier ran transactions disproportionate or unexpected in volume, value, or nature for the size of its business and its history.

A triggered indicator does not block the deal. It obliges you to keep a written reason for dealing with that supplier anyway, and to hand it to the FTA on request. The explanation must not contradict the documents you hold.

Checking each supply: price, licence, origin, payment

Article 4 adds checks on every taxable supply, not just on the supplier.

• Commercial rationale. An assessment of the terms, confirming the supplier's involvement has a genuine commercial basis.
• Payment. The method and terms must make commercial sense. Payment through a third party, or to an account in a country where the supplier isn't registered, needs a reasonable explanation.
• Form of settlement. Payment should be electronic. Cash is allowed with a documented commercial reason, within the thresholds in tax legislation, and in a way that is easy to verify.
• Price and margin. Neither should be commercially inexplicable or far off market without a clear reason.
• Licence. The goods or services must sit within the supplier's usual activity and what its trade licence permits — how to read one is covered in our guide on business and companies in the UAE.
• Origin of goods. The authenticity and origin of the consignment, and the supplier's right to own or dispose of it.
• Intermediary. Where the supplier acts as a middleman, a clear commercial explanation of its role in the chain.

The AED 10,000 threshold and when it stops working

Small stuff needs no checks: Article 6 lets you skip every measure on supplies worth less than AED 10,000 excluding VAT.

The trap is in the second part of the same article. The exemption falls away once the total value of supplies from that supplier passes AED 100,000 over the previous 12 months, or is expected to pass it over the next 12.

Count by supplier, not by invoice. A small contractor billing AED 4,000 a week crosses AED 100,000 in roughly six months — and all of its supplies then fall under the full checks.

What to do before 1 October

• Export a list of every supplier from the last 12 months with amounts. Mark three groups: under AED 10,000 per supply, above AED 100,000 cumulative, above AED 375,000.
• Open a file on each supplier using the list above.
• For the group above AED 375,000, request UAE bank letters confirming the account — the slowest item on this list, since banks do not answer in a day.
• Compare the activities on suppliers' licences against what they actually deliver. Put mismatches on a separate list.
• Move settlements to electronic payment. For any cash that remains, prepare a written justification per case.
• Build the check into procurement: no completed supplier file, no payment approval.
• Set a 12-month reminder against each supplier.

What inaction costs in money

The direct price is lost input VAT recovery on any transaction where the FTA finds a link to evasion — 5% of the purchase, turning from pass-through money into your expense.

The indirect price is carrying someone else's scheme. The goods arrived, the money left, the tax stayed with you. Recovering that gap from a vanished counterparty rarely works.

A separate layer is a director's exposure for the company's tax decisions — the limits of that are covered in company debts and personal liability.

Roughly six weeks separate publication of the decision from the day it applies. Supplier files and bank letters do not come together in a week.

This material is for information only and is not legal advice. UAE law changes — a lawyer will assess how it applies to your situation.