The Federal Tax Authority (FTA) in the UAE has introduced stringent new due diligence requirements under Decision No. 13 of 2026, aimed at curbing tax evasion. Effective October 1, 2026, these regulations mandate that businesses verify both their suppliers and the integrity of individual supplies to remain eligible for input VAT recovery. If a transaction is linked to tax evasion, the FTA now has the authority to reject VAT refund claims—either mandatorily if the business was aware of the evasion or at its discretion if the business failed to perform necessary checks. Consequently, companies are now legally required to maintain formal internal policies that clearly outline the individuals responsible for conducting and overseeing these mandatory verification processes.

The compliance framework is divided into two primary categories: supplier verification and supply verification. Supplier checks involve validating identity documentation, verifying authorized representatives, and ensuring the supplier has a legitimate physical presence, with additional requirements for high-value contracts exceeding Dh375,000, such as bank account confirmation. Supply verification is even more granular, requiring businesses to confirm the commercial logic behind every transaction, ensure pricing is reasonable, and verify that goods align with the supplier’s licensed activities. While there is a de minimis exemption for transactions under Dh10,000, this relief is largely ineffective for recurring business relationships, as it is voided once annual supply totals from a vendor surpass Dh100,000. With the October deadline fast approaching, UAE businesses must urgently establish these documentation protocols to avoid significant financial risks.