| Issued 22 July 2026 |
Effective 1 October 2026 |
Legal basis Article 54(bis), UAE VAT Law |
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1. Article 54(bis) of the VAT Law
Article 54(bis) was introduced into the UAE VAT Law through Federal Decree-Law No. 16 of 2025. The provision empowers the Federal Tax Authority ("FTA") to deny the recovery of input VAT where a supply is connected to tax evasion and the taxable person knew, or should reasonably have known, of that connection.
FTA Decision No. 13 of 2026 (‘the Decision’) establishes the verification measures, procedures and conditions that taxable persons should follow to prove that validity and integrity of the suppliers and supplies were verified before recovering input VAT in order to satisfy Article 54(bis) requirements.
Article 54(bis) sets two different rules — one mandatory, one discretionary:
| Rules | What the law says | When it applies |
|---|---|---|
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SHALL Reject
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The FTA shall reject the input tax deduction where the supply was part of a supply or chain of supplies related to tax evasion, and the taxable person was aware of that connection.
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The business knew of the link to evasion (actual knowledge).
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MAY Reject
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The FTA may reject the deduction where the business should, based on the circumstances, should have known of the tax evasion connection.
A business may be regarded as having "should have known" of tax evasion where it failed to verify the validity and integrity of the supply before recovering input VAT, in accordance with the procedures prescribed by the FTA.
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The business should have known. No verification done = the “should have known” test is presumed against business. |
If one does not carry out the verification set out in this Decision, the FTA does not have to prove businesses knew about the fraud — the failure to verify is treated as “should have known”, and the input tax can be denied.
2. What Finance & Procurement must now do
The Decision requires two layers of checks — verify the supplier and verify each supply — supported by documentation and a written policy.
2A. Verify the supplier
| Requirement | What to check |
|---|---|
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Identify
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Place of business
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Confirm a real place of business exists (electronic check or field visit) and that it fits the supplier’s activity.
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Risk indicators
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Flag if the supplier changed address or key staff more than twice in 12 months, or runs transactions disproportionate to its size.
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High-value suppliers (> AED 375,000 over past or next 12 months) |
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2B. Verify each supplier
| Requirement | What to check |
|---|---|
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Commercial rationale
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The supplier’s involvement in the transaction must have a genuine commercial reason.
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Payment conditions
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Pricing
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Prices / margins must not be commercially unjustifiable or far from market without a clear reason.
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Scope & ownership
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2C. Frequency, documentation & policy
- Supplier checks: at first dealing, and again every 12 months.
- Supply checks: for every taxable supply received or accepted.
- Documentation: retain evidence of every step so the FTA can confirm it was done.
- Written policy: maintain a documented policy naming who implements, reviews and supervises the checks, and their powers.
3. Exceptions (Article 6)
De-minimis relief
Checks may be skipped where the consideration for a supply is less than AED 10,000 (excluding VAT).
The relief does NOT apply if total supplies from that supplier exceed AED 100,000 over the past or next 12 months — small invoices still count if the supplier relationship is large.
4. Deadline, consequences and what to avoid
Effective 1 October 2026 — the framework must be operating from this date.
| What is at stake: | What to avoid: | Recommended actions |
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How Grant Thornton UAE can help
This Decision moves VAT compliance from a documentation exercise to an active control environment. Grant Thornton UAE can help businesses assess the impact of the new requirements, design and implement supplier and supply verification frameworks, develop supporting policies and controls, and deliver targeted training for Finance and Procurement teams. We can also perform periodic reviews and sample testing to assess whether the controls and documentation are operating effectively in practice and identify areas for enhancement. Please contact your Grant Thornton UAE tax adviser for a practical implementation roadmap tailored to your business.
This update is intended for general information only and does not constitute tax, legal or accounting advice. FTA Decision No. 13 of 2026 is referenced from an unofficial English translation; the official Arabic text prevails. Specific advice should be obtained based on the circumstances of each business.
