UAE Input VAT From 1 October 2026: The New Supplier Checks

Since 1 October 2026, holding a valid tax invoice is no longer enough to safely recover input VAT in the UAE. Under FTA Decision No. 13 of 2026, a business must be able to show that it checked the supplier, and the supply itself, before deducting the VAT. In the same month, Cabinet Decision No. 149 of 2026 amended the VAT Executive Regulation, and FTA Decision No. 17 of 2026 set out when VAT on staff benefits can be recovered.

Here is what changed for UAE businesses, which suppliers you have to verify, and what records to keep for an audit.

What Changed on 1 October 2026

Federal Decree-Law No. 16 of 2025 added Article 54 bis to the VAT Law, allowing the Federal Tax Authority to refuse input tax where a supply is connected to tax evasion in the supply chain and the buyer knew, or should have known, about it. Decision 13 of 2026 spells out what “should have known” means in practice: the verification steps a reasonable business is expected to take.

The consequence of skipping them is not a separate fine but the loss of your input VAT recovery. Where actual knowledge of evasion is shown, denial is mandatory.

Which UAE Suppliers You Must Verify

Supplier verification is required when you deal with a supplier for the first time, and again if the supplier has not been verified in the previous 12 months. The thresholds:

• Below AED 10,000 (excluding VAT) per supply: generally exempt from detailed checks, as long as total supplies from that supplier over a rolling 12 months stay within AED 100,000.
• Above AED 100,000 in rolling 12-month supplies from one supplier: the small-supply exemption stops and full checks apply to that supplier.
• Above AED 375,000 in rolling 12-month supplies: enhanced checks apply (see below).

Re-verify immediately where risk indicators appear, for example a supplier changing its address or key personnel more than twice in 12 months, or transactions out of proportion to the supplier’s size and history.

Standard and Enhanced Checks

Standard supplier checks

• the supplier’s incorporation and identity documents, checked against official records;
• the identity and authority of the person representing the supplier;
• an actual place of business consistent with the supplier’s declared activity.

Enhanced checks above AED 375,000

• written confirmation from a UAE-licensed bank that the supplier holds the account you pay into;
• a public reputation review (media coverage, adverse reports, risk screening).

Checks on each supply

Separately from the supplier, each transaction should make commercial sense: a genuine business reason, reasonable pricing and margins, goods or services consistent with the supplier’s licensed activity, clear title and origin of goods, and a logical role for any intermediary.

Cash Payments and Other Changes Under Cabinet Decision 149

Cabinet Decision No. 149 of 2026 amended the VAT Executive Regulation, mostly with effect from 1 October 2026. The changes most relevant to small and mid-sized UAE businesses:

• Cash payments. Input tax recovery is restricted for supplies paid in cash above a threshold to be set by the Minister of Finance. The figure had not been published at the time of writing, so pay suppliers electronically where you can, and document the business reason for any cash payment.
• Employee accommodation. Employer-provided accommodation no longer qualifies for recovery simply because of general labour law obligations, unless a Ministry of Human Resources and Emiratisation decision makes it mandatory.
• Other technical changes cover composite supplies, healthcare goods, the profit margin scheme and the capital assets scheme. The input tax apportionment changes apply later, from the first tax year after 1 October 2027.

Recovering VAT on Staff Benefits

FTA Decision No. 17 of 2026 lists six cases in which input VAT on employee-related costs can be recovered, each with conditions and each requiring a contractual obligation or documented policy:

1. transport (home to work, client visits, job-related travel);
2. food and drink in remote locations without nearby facilities;
3. accommodation where the work requires living on site;
4. temporary housing for new employees, up to 30 days;
5. mobile phones, data and home internet needed for the job, under a usage policy;
6. business parking, with an approval process and receipts.

If no written policy or contract supports the benefit, assume the VAT is not recoverable.

Records to Keep for a UAE VAT Audit

Decision 13 requires a written verification policy that names who performs the checks, who reviews them and who supervises the process. Alongside it, keep supplier identity and incorporation documents, evidence of the business address and representative, bank confirmation letters for suppliers above AED 375,000, notes on the commercial rationale of material transactions, payment evidence and proof of the 12-month refresh. All of this fits naturally into the record-keeping your company already needs; see our overview of UAE company compliance in 2026, and the basics of VAT reporting in the UAE and the VAT registration threshold.

FAQ

What is FTA Decision No. 13 of 2026?

It sets the checks a UAE VAT-registered business must carry out on suppliers and supplies before deducting input tax, in force from 1 October 2026 under Article 54 bis of the VAT Law.

Is a valid tax invoice still enough to recover input VAT?

Not on its own. You must also be able to show that you verified the supplier and the supply in line with the Decision.

Do I have to check every small supplier?

Supplies under AED 10,000 are generally exempt from detailed checks unless total supplies from that supplier exceed AED 100,000 over a rolling 12 months.

What happens if I do not carry out the checks?

The FTA can deny your input VAT on supplies linked to evasion in the supply chain. Where actual knowledge is shown, denial is mandatory.

Can I still recover VAT on staff accommodation?

Only in the cases set out in FTA Decision No. 17 of 2026, for example where the work requires on-site living, supported by a contract or documented policy.

Conclusion

The 1 October changes shift the burden of proof onto the buyer: recovering input VAT now depends on documented supplier checks, not just a valid invoice. For most UAE businesses the work is a one-off clean-up of the supplier list, a written policy and an annual refresh. That is far cheaper than losing VAT recovery in an audit.

Need help putting a verification policy and supplier files in place, or setting up a company with compliant books from day one? See Legarithm’s UAE company formation and accounting services, or message us for a review.

Disclaimer: This article is general information as of October 2026 and is not tax advice. The cash-payment threshold under Cabinet Decision No. 149 of 2026 had not been published at the time of writing; confirm current rules with a registered UAE tax agent or the Federal Tax Authority before acting.