Key takeaways
- From 1 October 2026, the Federal Tax Authority (FTA) requires businesses to actively verify suppliers and transactions before deducting input VAT — a valid tax invoice and TRN are no longer automatically enough.
- Suppliers must be checked when you first deal with them, and re-checked at least every 12 months, covering identity, authorised representatives and business premises.
- Suppliers with annual supplies above AED 375,000 trigger extra checks: a UAE bank confirmation letter and a reputational/risk screening.
- Small purchases under AED 10,000 are exempt from the enhanced checks, but only if that supplier’s total annual supplies to you stay under AED 100,000.
What is changing on 1 October 2026
The FTA has confirmed that from 1 October 2026, businesses can no longer treat a valid tax invoice as automatic proof that input VAT is recoverable. If the FTA later finds that a supply was linked to tax evasion somewhere in the chain, it can deny your input tax recovery unless you can show you carried out reasonable checks on the supplier and the transaction before claiming it.
In practice, this shifts part of the burden of catching fraudulent or “missing trader” suppliers onto the businesses that deal with them. It does not change the standard VAT rate or the general recovery rules — it adds a due diligence layer on top.
What this means for you: if you claim input VAT on supplies from UAE vendors, you now need a documented process for checking who you are buying from, not just a filed invoice.
Supplier verification: what you need to check
Under the new rules, every taxable person must verify a supplier the first time they deal with them, and then again at least once every 12 months for as long as the relationship continues. The checks are meant to confirm that the supplier is genuinely who it says it is, including:
- The supplier’s legal identity and trade licence details.
- Who is authorised to represent the supplier and sign on its behalf.
- Whether the supplier actually operates from the business premises stated.
What this means for you: a one-off check at onboarding is not enough. You need a calendar-driven process to refresh supplier files annually, or you risk losing the ability to show the checks were current when a claim is challenged.
Extra due diligence for larger suppliers
Where a supplier’s annual supplies to you exceed AED 375,000, the FTA expects additional checks on top of the basic verification. These include obtaining a written UAE bank account confirmation letter for the supplier and carrying out a public reputation or media/risk screening to look for indicators of tax evasion. The bigger the spend with a single supplier, the more scrutiny the FTA expects you to have applied.
What this means for you: your largest and most regular suppliers need the deepest file. Businesses that concentrate spend with a handful of vendors should prioritise these first.
Transaction-level checks, not just supplier checks
The rules also expect scrutiny at the level of the individual transaction, not just the supplier relationship. Before deducting input VAT, a business should be able to show that each supply made commercial sense: that pricing and margins were broadly consistent with the market, that the goods or services matched the supplier’s licensed activity, and that payment moved through a normal, traceable route. Businesses are expected to keep a documented policy describing how these checks are performed, along with the records generated each time.
What this means for you: your bookkeeping and procurement teams need to hold on to more than the invoice — purchase orders, delivery evidence and payment trails all become part of your input VAT file.
The small transaction exemption
The FTA has built in relief for low-value, low-volume purchasing. A single supply is exempt from the enhanced checks if its value (before VAT) is under AED 10,000. However, that exemption falls away if the total value of supplies received from the same supplier over the preceding 12 months goes above AED 100,000. So a supplier you buy small amounts from occasionally is low-risk; the same supplier used repeatedly, adding up to a meaningful annual spend, is not.
What this means for you: track cumulative spend per supplier, not just invoice-by-invoice value, to know when a vendor has crossed into the higher-scrutiny bracket.
| Trigger | Threshold | Requirement from 1 October 2026 |
|---|---|---|
| Any new supplier | First transaction | Verify identity, representatives and business premises |
| Ongoing supplier relationship | Every 12 months | Repeat the supplier verification |
| High-value supplier | Annual supplies above AED 375,000 | Bank confirmation letter plus reputational/risk screening |
| Low-value purchase | Single supply under AED 10,000 | Exempt from enhanced checks |
| Exemption limit | Same supplier’s annual supplies above AED 100,000 | Exemption no longer applies |
What happens if you get it wrong
The consequence the FTA has flagged is denial of input tax recovery, not a separate fine on top. If a supply is later found to be linked to tax evasion and your business cannot demonstrate that it carried out the required checks, the FTA can treat you as if you knew, or should have known, about the problem — and disallow the input VAT you claimed. That can surface during a routine FTA audit, sometimes well after the return was filed, and any resulting adjustment can bring exposure to VAT penalties for the underpaid tax.
What this means for you: the real risk is not the new paperwork itself, but claiming VAT for years on a supplier relationship with no verification trail, only to have it unwound retroactively.
What to do now
With the rules taking effect from 1 October 2026, treat the run-up as a short window to get your supplier base in order rather than a distant deadline:
- List your active suppliers and flag which ones exceed the AED 375,000 annual threshold.
- Build a simple onboarding checklist covering identity, representatives and premises, and set a 12-month reminder to refresh it.
- Request bank confirmation letters from your highest-spend suppliers now, before the deadline creates a rush.
- Keep a written policy on how transaction-level checks are performed, and store the supporting evidence alongside your VAT records.
- Review any supplier relationship that already looks unusual — inconsistent pricing, activity that doesn’t match the trade licence, or payments outside normal channels — before 1 October 2026.
If you are unsure how much due diligence is proportionate for your supplier base, it is worth getting a second opinion before the rules bite rather than after an audit raises questions.
Frequently asked questions
Does this apply to every VAT-registered business in the UAE?
Yes. The verification requirement applies to taxable persons generally when they deduct input VAT on supplies from UAE vendors — it is not limited to a particular sector or business size, though the depth of checks scales with how much you spend with each supplier.
Do I need to re-verify a supplier I have used for years?
Yes, if it has been 12 months or more since the last verification. The rule requires refreshing checks at least annually for as long as the relationship continues, not just a one-time check when you first started buying from them.
What if a supplier refuses to provide a bank confirmation letter?
The FTA has not published a specific carve-out for this. If a high-value supplier will not cooperate with the enhanced checks, that itself is worth treating as a risk indicator and documenting as part of your assessment before continuing to claim input VAT on their supplies.
Can the FTA deny input VAT I already claimed before 1 October 2026?
The new verification obligation applies from 1 October 2026 onwards. For supplies before that date, existing input tax rules continue to apply. If you are uncertain about a specific past claim, it is best to seek advice rather than assume either way.
Does this replace the need for normal VAT invoices and TRNs?
No. A valid tax invoice showing the supplier’s TRN is still a basic requirement for input tax recovery. The new rules add supplier and transaction due diligence on top of that, they do not remove the existing invoicing conditions.