Hold the claim and check the supplier first. Since 1 October 2026, a UAE business that wants to deduct input VAT must first check that the supplier is genuine and that the deal makes commercial sense. If it skips those checks and the supply later turns out to be part of a tax fraud, the Federal Tax Authority can refuse the deduction.
This note works through Case 1 of The Quarter, our series of practical VAT decisions. Layla, the CFO, had to decide whether to sign off a new supplier's first invoice.
The case
A new supplier's first invoice lands on the desk of Omar, who runs accounts payable: AED 180,000 of laptops, plus AED 9,000 VAT. Two details stand out. The supplier was set up only a few months ago. And their email asks for payment into a different company's bank account.
Omar wants to claim the AED 9,000 on this quarter's VAT return and needs Layla's sign-off. The right call is to check the supplier first, then claim.
The rule
Two pieces of law work together here.
Article 54 (bis) of the VAT Law. Federal Decree-Law No. 16 of 2025 amended the UAE VAT Law from 1 January 2026. It lets the FTA refuse input tax where it determines that a supply forms part of a tax-evasion arrangement. It also says businesses must check the validity and integrity of the supplies they receive, following procedures set by the FTA.
FTA Decision No. 13 of 2026. Issued on 22 July 2026 and in force since 1 October 2026, it sets out those procedures.
For the supplier (Article 3), when the supplier is a company you must:
- Verify its incorporation through official databases or its certificate, and check that the details match its name, address and staff.
- Verify the identity of the person who represents it, with a valid Emirates ID or passport.
- Confirm it has a real place of business, by electronic means or a site visit, that fits the work it does.
- Look for risk indicators: more than two address changes, or more than two changes of key staff, in the last 12 months, or deals out of proportion to its size and history. If one applies, keep a written explanation.
- Where purchases from the supplier exceed AED 375,000 over the previous 12 months, or are expected to over the next 12, also obtain written confirmation from a UAE bank that the supplier has an account, and review public reviews and media coverage.
For each supply (Article 4), you must check that:
- There is a genuine commercial reason for the deal.
- Payment is made electronically. A cash payment needs a documented commercial reason, must stay within the limits set by tax law and must be easy to verify.
- If a third party is involved in the payment, or the money goes to an account outside the supplier's country of incorporation, you need a reasonable commercial explanation.
- Prices are in line with the market, the goods or services fall within the supplier's licensed activity, and the goods are authentic and theirs to sell.
Article 5 says when this happens: on the first dealing with a supplier, again if it has not been verified in the last 12 months, and for every supply. You must document the steps you took and keep a written policy naming who carries out, reviews and supervises the checks. Article 6 exempts supplies under AED 10,000 excluding VAT, unless your purchases from that supplier exceed AED 100,000 over the previous 12 months, or are expected to over the next 12.
A worked example
Here is how the rules apply to Omar's invoice.
| Question | Answer for this invoice |
|---|---|
| Value excluding VAT | AED 180,000, so the AED 10,000 exemption does not apply |
| First dealing with this supplier? | Yes, so the full supplier checks apply |
| Over AED 375,000 in 12 months? | Not yet. The bank letter is needed only if further orders are expected to take the total above AED 375,000 |
| Who receives the payment? | A different company. That needs a reasonable commercial explanation, in writing |
| VAT at stake | AED 9,000 |
So Layla holds the claim. Omar checks the supplier's incorporation and representative, confirms the place of business, asks why the money should go to another company and keeps the answer on file. If everything checks out and is documented, the AED 9,000 can be claimed. If the explanation for the third-party account does not hold up, the claim should not be made.
How Safa checks this
Safa's part is the invoice itself. For every purchase invoice, Safa checks that it is a proper tax invoice: that it is labelled as a tax invoice, shows the supplier's tax registration number (TRN) and the buyer's TRN, and that the net, VAT and total add up. It then looks up the invoice in the VAT export from your ERP and confirms that what was booked matches the document.
Each invoice gets a verdict and a plain-language reason, kept with the analysis. That gives you a record of what was checked on the document side.
The supplier checks in Decision No. 13 are different. Confirming identity, premises and bank details needs your team, and Safa does not do it.
What it means for your business
The AED 9,000 in this case is the cost of skipping the checks: if the supplier turns out to be part of a fraud, that deduction can be refused. Across a quarter of new suppliers, the exposure adds up quickly.
Three practical steps:
- Write the policy that Article 5 requires: who checks suppliers, who reviews the checks and where the evidence is kept.
- Add a supplier check to onboarding, so no new supplier's invoice reaches the VAT return before the check is done.
- Treat payment to a third party as a stop sign until there is a written commercial reason.
Next in The Quarter: Layla's scoreboard, and what was at stake in dirhams.