Key takeaways
- From 1 October 2026, businesses must verify suppliers and supplies before deducting input VAT — a valid tax invoice is no longer enough on its own.
- Suppliers must be checked when you first deal with them and at least every 12 months after, with extra checks once a supplier’s supplies to you reach AED 375,000 in a rolling year.
- Single supplies under AED 10,000 escape verification, but only while that supplier’s total annual supplies to you stay under AED 100,000.
- The FTA can refuse to let you deduct input tax if you knew, or reasonably should have known, that a supply was tied to tax evasion — so your evidence file matters as much as the invoice.
What’s actually changing on 1 October 2026
The Federal Tax Authority has confirmed new rules requiring VAT-registered businesses to check the suppliers and supplies behind every input tax claim, not just keep a compliant tax invoice on file. The rules take effect on 1 October 2026.
Until now, most businesses treated input tax recovery as straightforward: get a valid tax invoice, pay the VAT, claim it back on the next return. From October, that’s still the starting point, but the FTA can deny the deduction if it decides you knew — or reasonably should have known — that the supply was connected to tax evasion somewhere in the chain. The burden of showing you carried out reasonable checks sits with you, not the FTA.
This matters most if you buy from smaller or less established suppliers, use intermediaries, or pay through third parties. If your supplier base is a handful of long-standing, well-known vendors, the practical impact is lighter. If it isn’t, you now need a documented process.
Who you need to verify, and how often
The verification obligation applies to every supplier you deal with for VAT purposes, with two checkpoints:
- Before or when you first transact with a new supplier
- At least once every 12 months after that, if no check has been done in the preceding year
For an individual supplier, that means confirming identity documents — an Emirates ID or passport — and, where you’re dealing with a company, verifying its trade licence or incorporation details through official records and confirming the identity of whoever is signing on its behalf. You’re also expected to satisfy yourself that the supplier has a genuine, physical place of business appropriate to what it claims to do, checked electronically or, where warranted, through a site visit.
What this means for you: if your procurement process today is “get a quote, get an invoice, pay,” you need to insert an onboarding step and an annual refresh, and keep evidence of both.
The three AED thresholds that decide how much checking you do
The scope of verification scales with how much you buy from each supplier. Three figures matter:
| Threshold | What it triggers |
|---|---|
| AED 10,000 | Individual supplies below this value (excluding VAT) don’t need verification on their own |
| AED 100,000 | The AED 10,000 exemption stops applying once a supplier’s total annual supplies to you reach this level — every supply from that supplier then needs checking |
| AED 375,000 | Once a supplier’s supplies to you reach this amount in a rolling 12-month period, enhanced checks apply — including a bank confirmation letter and a reputational/media screen for tax evasion indicators |
What this means for you: run your supplier list against these three numbers now. Anyone already past AED 375,000 needs the enhanced file built before 1 October; anyone approaching AED 100,000 needs standard verification, even if individual invoices look small.
Red flags the FTA expects you to document
The rules also flag specific patterns that need a documented, justified explanation on file rather than a check you can wave away. These include a supplier that has:
- Changed its registered address more than twice in the past 12 months
- Changed key personnel — owners, managers, authorised signatories — more than twice in the past 12 months
- Transaction volumes or values that look disproportionate to its size or trading history
None of these automatically block a claim. But if the FTA later asks why you kept dealing with a supplier showing one of these patterns, “we didn’t notice” won’t be a good answer. You need a note on file explaining what you saw and why you were satisfied it was legitimate.
What this means for you: build a simple checklist your team runs through for new and existing suppliers, and keep the notes — not just the tick.
Payment terms and pricing come under scrutiny too
Verification isn’t limited to who the supplier is. The FTA also expects you to be able to justify how a supply was priced and paid for. That includes being able to explain:
- Why pricing is broadly in line with market rates for that type of supply
- Why payment was made by a particular method — cash payments in particular need a documented commercial reason
- Any payment made to a third party or an overseas bank account rather than the supplier itself
- Why an intermediary was involved, where one was, and what it added commercially
This is the part most likely to catch businesses out, because pricing and payment routing are usually handled by finance or procurement teams who’ve never been asked to justify them for tax purposes before.
What to do now
You have until 1 October 2026. Realistically, that means starting in the next few weeks, not December.
- Pull a supplier list and flag who’s above AED 100,000 and AED 375,000 in the last 12 months.
- Build (or ask for help building) a documented verification policy — who checks, what they check, and where the evidence is stored.
- Run the enhanced checks — bank confirmation letters, reputational screening — for suppliers already past AED 375,000, so you’re not doing it retroactively after an FTA audit is already underway.
- Fold the new checklist into your onboarding process for any new supplier from now on.
- Keep the verification records alongside your normal bookkeeping and VAT return files, not in a separate folder nobody remembers exists.
Getting this wrong doesn’t just cost you the input tax itself — a denied claim can also expose you to VAT penalties if it’s treated as an incorrect return. Reflechir Consultancy can review your current supplier base against the three thresholds, help you build the verification policy, and get the evidence file in place before the deadline.
Frequently asked questions
Does this apply to all VAT-registered businesses, or just certain sectors?
It applies across the board to VAT-registered businesses claiming input tax. There’s no sector carve-out in what’s been published. The practical burden depends on your supplier base — businesses buying mainly from large, established vendors will find the everyday impact small, but the check-and-document obligation itself applies to everyone.
What happens if we don’t verify a supplier and the FTA later questions the claim?
The FTA can deny the input tax deduction on that supply if it decides you knew, or reasonably should have known, of a connection to tax evasion. Without a documented verification trail, it’s much harder to show you took reasonable steps.
Do we need to re-verify every supplier every year regardless of spend?
The annual refresh applies where a supplier hasn’t been checked in the preceding 12 months. Suppliers under the AED 10,000/AED 100,000 exemption combination don’t need the same level of checking, but keep records showing you assessed whether the exemption applied.
What counts as acceptable evidence of verification?
Based on the requirements, that includes identity or incorporation documents, evidence of how you confirmed the business address, notes explaining any risk indicators you saw, and — above the AED 375,000 threshold — a bank confirmation letter and a record of the reputational screening carried out.
Is this the same as an FTA audit?
No. This is a documentation requirement you build into your own procurement and VAT process, ahead of any audit. It does, however, become directly relevant if the FTA later opens a review of your VAT returns, since the verification file is what you’d rely on to defend an input tax claim.