Federal Tax Authority Decision No. 13 of 2026, effective from October 1, 2026, is about to comprehensively change how your business manages compliance for VAT.
This will affect how supplier invoicing is managed and has specific financial implications if you fail to correctly implement, control on an ongoing basis and respond when requested.
Let’s start with what will now be required to verify your supplier, of which there are two types.
Firstly, natural persons who are VAT registered. You may ask how that can happen. Imagine if the landlord of your office floor, where you pay rent of Dh500,000 ($136,120) a year, is an individual.
Because that person earns over the VAT registration threshold, they must register for the tax and levy it.
Before claiming the VAT charged, you now must meet that individual, in person or virtually, and have a copy of their identity proof, such as a passport or Emirates ID. Although it’s not mentioned, I’d imagine that they should be current at the time of the VAT input reclaim.
Secondly, when dealing with a licensed company, you must now verify that it is legally incorporated. A copy of their certificate of incorporation will suffice and as this never expires, it’s the best document to hold. Any other official database may be used, although none are listed by way of example.
This is then used to confirm a supplier’s name and address against the trade licence they’ve provided you. What’s worrying here is that it mentions employees and other related information.
The names mentioned on trade licences are the manager(s) in charge and occasionally some or all of the shareholders. Further, as these can change, you are at the mercy of your supplier updating this information in a timely manner to the relevant trade licence-issuing authority and forwarding the updated document to you. This will be an interesting exercise in larger organisations.
We’re not done. You must also verify the identity of the person representing the supplier, again with a passport or Emirates ID. The wording suggests that the individual must be empowered to represent the supplier. This I would read to mean is someone who can contract on their behalf.
That would narrow the pool of individuals considerably. Now you might also need confirmation of shareholding, notarised power of attorney or board resolutions.
For both types, you must verify that supplier’s place of business, either finding sufficient online proof or visiting the location. The latter would seem required in certain circumstances as you are also required to ensure that their premises are suitable for the purpose of delivering the goods or services you are purchasing from them.
Identifying risks
Another task required is to review and identify risks relating to each supplier. This challenge has three elements to overcome.
Should the supplier have changed offices more than twice in a 12-month period, or the same for the person your business interacts with, or the volume or nature of their business materially changes, it falls to you to clearly document and justify why this causes you no concern. You may be asked to present this information during an audit by a relevant authority.
You must also verify that each supplier, from whom you are planning to reclaim VAT, has a bank account where the value of annual purchases exceeds the VAT registration threshold or is expected to, over the subsequent 12 months.
This takes the form of getting a letter of confirmation from your supplier’s bank. The letter need not be addressed to you.
Scan the publicly available media to investigate whether your supplier is trading in a manner consistent with what you’ve been led to believe.
Where your supplier requests that payment is made to a non-UAE located bank, you must retain the evidence that there’s a reasonable commercial reason for the same.
Payment should never be made in cash unless there is a documented reason, commercially substantiable, for doing so. The legislation mentions thresholds, but I’m not aware of any bandwidths that detail these.
You must be content that the purchase price is a fair market price, as should the margin achieved.
You must also ensure that the supplier has the right, detailed on their trade licence, to sell the goods and services you are purchasing, and that they’ve title to them.
You must appoint someone internally to manage the above. Purchases less than Dh10,000 before VAT fall outside the above guidelines, unless in total, surpassing Dh100,000 in any 12-month period.
