In short
- Check a supplier at the first deal and again after 12 months. Check every supply you deduct.
- Under AED 10,000 a supply needs no checks, unless the supplier passes AED 100,000 in 12 months.
- Above AED 375,000 in 12 months: a bank's written confirmation and a review of public information.
- Input VAT on staff costs is recovered in the six cases of FTA Decision No. 17 of 2026.
In this guide
What input VAT is, and when a UAE business recovers it
Input VAT is the 5% a registered business pays on its purchases and imports. Output VAT is the 5% it charges on its sales. Each return sets one against the other, and the business pays the difference or carries a credit. Registration comes first: the thresholds and the steps are on VAT registration in the UAE.
The VAT law allows the deduction on four conditions:
- The purchase serves taxable sales: sales at 5% or 0%, or sales abroad that would be taxable in the UAE.
- You hold the tax invoice, with the particulars listed in the tax invoice format in the UAE, or the invoice and customs documents of an import.
- You have paid, or intend to pay within six months of the agreed date.
- The cost is not on the blocked list, such as entertaining clients.
The deduction goes into the return for the first period in which the invoice is in hand and the payment is intended, or into the next one. After that it takes a voluntary disclosure. A bill still unpaid six months after its due date is taken back out of the claim until it is paid.
What changed on 1 October 2026
Three acts took effect on the same day. They rest on a fourth, which has applied since the start of the year.
| Act | In force | What it does |
|---|---|---|
| Federal Decree-Law No. 16 of 2025 | 1 January 2026 | Adds Article 54 bis to the VAT law: input VAT is refused on supplies tied to tax evasion |
| FTA Decision No. 13 of 2026 | 1 October 2026 | Sets the checks on suppliers and on supplies |
| Cabinet Decision No. 149 of 2026 | 1 October 2026 | Amends the Executive Regulation: cash payments, staff housing and other points |
| FTA Decision No. 17 of 2026 | 1 October 2026 | Names six cases of recoverable VAT on staff costs |
Article 54 bis works on two levels. Where the Federal Tax Authority (FTA) shows that the buyer knew the supply belonged to a chain tied to tax evasion, it refuses the deduction. Where the buyer should have known, the authority can refuse it, and a buyer who did not verify the supply counts as one who should have known. The chain means every party in it, beyond your direct supplier.
The Decision carries no fine of its own. What is at stake is the deduction: 5% of every purchase the authority ties to the chain.
Which suppliers you must check: AED 10,000, 100,000 and 375,000
The Decision applies to every VAT-registered business, for the supplies it receives and deducts input VAT on. Three figures decide how much checking a supplier needs. Each total is counted over the past 12 months, or as expected over the next 12.
| Purchases from one supplier | What you do |
|---|---|
| Each supply under AED 10,000 before VAT, total up to AED 100,000 | No checks required |
| A supply of AED 10,000 or more | Check the supplier and the supply |
| Total above AED 100,000 | Check the supplier and every supply, the small ones too |
| Total above AED 375,000 | Add a bank's written confirmation and a review of public information |
A worked example: three suppliers of one consultancy
| Supplier | Purchases in 12 months | Input VAT | Checks |
|---|---|---|---|
| Software subscription | 12 invoices of AED 6,000: AED 72,000 | AED 3,600 | None |
| Subcontractor | 12 invoices of AED 9,000: AED 108,000 | AED 5,400 | Supplier and each supply |
| Equipment dealer | One order of AED 400,000 | AED 20,000 | Supplier, supply, bank confirmation, public information |
The subcontractor shows the trap. No single invoice reaches AED 10,000, but the year's total will pass AED 100,000, so the exemption falls away from the first invoice. On the two checked suppliers AED 25,400 of input VAT depends on the file. A supplier is verified when you first deal with it, and again once 12 months have passed since the last verification.
The supplier checks, step by step
Start with the number on the invoice: TRN verification in the UAE. Then the five checks of the decision follow in this order.
- Identity. For a company: its incorporation in an official register, or a copy of its certificate, with a name, an address and details that match. For an individual: a copy of the Emirates ID or passport, and a meeting in person or by video before the supply.
- Representative. A copy of the Emirates ID or passport of the director, agent or employee who acts for the supplier.
- Place of business. Evidence that it exists, by electronic means or a visit, and that it fits what the supplier does.
- Risk signs. The supplier has not changed its address or its key people more than twice in 12 months, and its deals fit its size and history in volume, value and nature.
- Above AED 375,000. A written confirmation from a bank licensed in the UAE that the supplier holds an account, with no reservations, and a review of public reviews and media coverage.
A risk sign does not block the purchase. The Decision asks you to keep a clear, reasoned explanation of why it applies and to give it to the authority on request. The bank's confirmation need not be addressed to you.
The checks on each purchase, and the rule on cash
The supplier file is renewed once a year. The purchase is looked at every time:
- The deal has a real commercial reason, on the supplier's side too.
- The price and the margin are in line with the market, or the difference has a clear reason.
- The goods or services belong to the supplier's usual trade and to the activities on its license.
- Goods are authentic, their origin is known, and the supplier owns them or has the right to sell them.
- An intermediary has a clear and reasoned role in the supply.
- Payment is electronic. A third party in the payment, or an account outside the supplier's country, needs a reasonable commercial explanation.
Cash is accepted only for a documented commercial reason, within the limits of the tax legislation and in a form that can be verified. Cabinet Decision No. 149 goes further. Input VAT cannot be recovered on a supply paid, or meant to be paid, in cash when its value exceeds an amount set by the Minister of Finance. On 10 October 2026 the Ministry's legislation page carried no decision with that amount. Pay suppliers by bank transfer.
We do this for you VAT registration in the UAE from $350 a month with accounting
Staff housing and the other changes of Cabinet Decision No. 149
- Staff accommodation. Labour law alone no longer makes its VAT recoverable. Housing qualifies where a decision or directive of the Ministry of Human Resources and Emiratisation makes it mandatory, or in the cases of the next section.
- Composite supplies. A sale whose parts are tied together and cannot be separated is one supply, taxed as its principal part.
- Profit margin scheme. The purchase price under the scheme includes buying costs whose VAT is not recoverable.
- Medical products. Zero-rating covers products named by the Cabinet and goods needed in a zero-rated healthcare service.
- Apportionment. New rules for businesses with exempt sales start with the first tax year that begins after 1 October 2027.
The same Decision rewords the definition of a capital asset, the content of a tax credit note and the test of who counts as outside the UAE for financial services.
Input VAT on staff costs: the six cases of FTA Decision No. 17
Goods and services given to employees free of charge are blocked, with exceptions. Since 1 October 2026 the exception for a contract or a written policy covers six cases, each with conditions.
| Cost | Recoverable when |
|---|---|
| Transport | Between home and work, to clients or on duty; no private use; no cash option |
| Food and drink | The employee lives in a remote place with no kitchen or restaurant near; tied to the work period; no cash option |
| Accommodation | The work requires living near the site; for the employee alone; no cash option; no leisure extras |
| Housing for a new employee | Temporary, for up to 30 days |
| Phone, data, home internet | Needed for the job; private use incidental; a written policy and monitoring |
| Parking | For business only; a written policy with an approval step; receipts kept |
Two exceptions stand beside the six. One is goods and services that labour law obliges the employer to provide. The other is health insurance for employees and their families, up to a spouse and three children under 18. A benefit with no contract and no written policy behind it stays blocked.
Input VAT you cannot recover
- Entertainment for people who are not employees: clients, prospects, officials, shareholders. Food and drink served in the normal course of a meeting is not entertainment.
- A car bought, rented or leased for the business that is available for private use. Taxis, emergency vehicles and rental fleets are outside the rule.
- Goods and services for the personal benefit of employees, outside the exceptions above.
- Costs of exempt sales, such as residential rent or financial services with no explicit fee.
VAT you cannot recover is part of the cost. The corporate tax law bars the deduction of recoverable input VAT only: see corporate tax in the UAE.
Records to keep, and for how long
The Decision asks for two things in writing. The first is the steps taken for each supplier and each supply, with the documents. The second is a policy that names who carries out the checks, who reviews them and who supervises, kept where the tax records are kept. A supplier file holds:
- The register extract or certificate of incorporation, and the license.
- The identity document of the representative.
- Evidence of the place of business.
- The bank confirmation and the review of public information, above AED 375,000.
- A note on the commercial reason and the price of material purchases.
- Proof of payment by transfer.
- The date of the check and of the next one.
Tax records are kept for 5 years after the tax period, and longer during an audit or a dispute. Complete, legible scans are accepted in place of paper.
Before a purchase invoice enters the return we run these checks and file the evidence with your books. The returns are part of accounting in the UAE, from $350 a month, and the fines for a late or incorrect return are in the table on VAT registration in the UAE. Invoices themselves change next: e-invoicing in the UAE starts on 1 January 2027 for the largest companies.
