For many UAE businesses, VAT compliance has traditionally focused on keeping accurate invoices, maintaining financial records and submitting returns on time.
But recent changes to UAE VAT legislation mean businesses now need to pay closer attention to something else: the suppliers they work with and the transactions behind their VAT claims.
From 1 October 2026, new verification requirements introduced by the Federal Tax Authority (FTA) have strengthened the checks businesses must undertake before recovering input VAT.
Under FTA Decision No. 13 of 2026, businesses must follow specified procedures to verify the legitimacy of suppliers and supplies, helping to prevent VAT recovery on transactions connected to tax evasion.
For business owners, finance teams and accountants across the UAE, this makes supplier due diligence an increasingly important part of everyday VAT compliance.
What exactly has changed?
The new requirements form part of the UAE's continuing efforts to strengthen tax transparency, improve compliance and reduce tax evasion.
Article 54(bis) of the UAE VAT Law allows the FTA to deny input VAT recovery where the relevant supply forms part of an arrangement connected to tax evasion and the business knew, or should have known, about that connection.
FTA Decision No. 13 of 2026 sets out the verification measures businesses are expected to undertake.
In practical terms, businesses need to look beyond simply receiving a tax invoice.
They must also consider whether their suppliers are legitimate, whether the goods or services have genuinely been supplied and whether the transactions make commercial sense.
Importantly, the new requirements do not mean every supplier is fraudulent or every VAT claim is at risk. They mean businesses must undertake appropriate checks and retain evidence that those checks have been completed.
What checks should UAE businesses be carrying out?
The requirements cover several important areas of supplier and transaction verification.
For example, businesses may need to verify a supplier's identity, incorporation details, authorised representatives and actual business premises.
They must also assess relevant risk indicators, including unusual changes in a supplier's business details or transactions that appear inconsistent with its size and trading history.
For supplies exceeding, or expected to exceed, AED 375,000 from a supplier over a 12-month period, additional checks apply, including obtaining evidence of a UAE bank account and reviewing relevant public information and business reputation.
The underlying transactions must also be assessed. This includes their commercial purpose, payment arrangements, pricing, the supplier's normal business activities and the origin of goods where relevant.
Do these rules apply to every purchase?
Not every purchase requires the same level of supplier verification.
The Decision provides an exception for certain supplies valued below AED 10,000, excluding VAT, subject to conditions.
However, that exception does not apply where supplies from the same supplier exceed AED 100,000 over the previous 12 months, or are expected to exceed that amount over the following 12 months.
Supplier verification is generally required when dealing with a supplier for the first time, or where the supplier has not been verified during the previous 12 months.
Businesses must also verify taxable supplies in accordance with the Decision and maintain a documented policy assigning responsibility for the verification procedures.
This makes it important to establish a proportionate, organised process rather than treating every purchase in exactly the same way.
What happens if your business doesn't carry out the required checks?
The consequences could be significant.
Where the FTA establishes that input VAT relates to a supply chain connected to tax evasion, failure to carry out the required verification procedures may affect a business's entitlement to recover that VAT.
For businesses with substantial supplier expenditure, an unsuccessful VAT recovery claim could create an unexpected financial liability.
There may also be additional administrative work involved in responding to FTA enquiries, reconstructing records or explaining transactions that were not properly documented at the time.
This is why having a clear, consistent supplier verification process is so important.
Rather than waiting until a VAT return is being prepared, businesses should consider building the relevant checks into supplier onboarding, procurement and accounts payable procedures.
Five practical steps UAE businesses can take now
Although the new requirements are already in force, businesses can still take practical steps to strengthen their processes.
1. Review your existing supplier records
Check whether you hold the necessary information to verify the identity and legitimacy of your suppliers. Identify missing information and prioritise suppliers where additional verification is required.
2. Update your supplier onboarding process
Introduce a consistent process for checking new suppliers before entering into transactions and claiming input VAT.
3. Review unusual transactions
Consider whether transactions involving unusual payment arrangements, unexpected pricing or unfamiliar intermediaries require further investigation and supporting evidence.
4. Maintain a documented verification policy
Clearly identify who is responsible for supplier checks, transaction verification, reviewing records and supervising the process.
5. Review your VAT compliance procedures
Make sure your bookkeeping, purchasing and VAT return preparation processes work together so that verification evidence is available before input VAT is deducted.
These measures can help businesses establish stronger financial controls and reduce the risk of unsupported VAT claims.
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How Zyla Accountants can help
VAT compliance is about more than submitting a return on time. It also involves maintaining reliable financial records, understanding the transactions behind the figures and ensuring that the correct supporting evidence is available.
At Zyla Accountants, we support UAE businesses with practical accounting, bookkeeping and VAT services, helping business owners maintain greater visibility and control over their finances.
Whether you're managing a growing business, working with multiple suppliers or simply want greater confidence in your VAT processes, our team can help you understand your obligations and identify areas that may require attention.
Concerned about how the new UAE VAT requirements could affect your business?
Get in touch with Zyla Accountants UAE to discuss your VAT compliance and accounting requirements.
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