From 1 October 2026 UAE businesses that claim input VAT must verify every significant supplier and transaction. The rule was introduced by the UAE Federal Tax Authority (FTA) through Decision No. 13 of 2026 — Know Your Supplier (KYS). Skip the checks and the FTA may deny the input VAT recovery.
What the FTA has introduced
Decision No. 13 of 2026 was approved by the FTA Board on 23 June 2026, issued on 22 July, and published on the regulator's website on 20 August. Its legal foundation is Federal Decree-Law No. 16 of 2025, which added Article 54 bis to the VAT Law: as of 1 January 2026 the FTA may already refuse an input VAT recovery where a supply is linked to tax evasion and the taxable person "knew or should have known" of that link. Decision 13/2026 turns that general power into a specific, mandatory checklist — effective 1 October.
KYS applies to every VAT-registered business in the UAE — regardless of size, sector or free zone. There are no carve-outs. For founders it is a strong signal that the UAE's VAT 5% regime for entrepreneurs now treats documented compliance as a condition of recovery, not a formality.
Thresholds: when checks are mandatory
Decision 13/2026 sets three monetary thresholds (all excluding VAT):
- AED 10,000 per single supply — below this level the detailed verification can generally be disregarded, subject to the usual VAT conditions.
- AED 100,000 on a rolling 12-month basis per supplier — once combined purchases from a single counterparty cross this level, the "below AED 10,000" shortcut no longer applies: all current and future supplies from that supplier fall under the full KYS regime.
- AED 375,000 on a rolling 12-month basis per supplier — additional requirements kick in: an unqualified written confirmation from a UAE-licensed bank that the supplier holds an account there, plus a public reputation review (customer reviews, media coverage, legal history).
Supplier verification — annual
Supplier verification is done at the first transaction and refreshed at least every 12 months — sooner if risk indicators appear. You must:
- verify the counterparty's identity documents against official UAE registers;
- confirm the authority of signatories and authorised representatives;
- confirm genuine operation from the declared business address — not just a paper registration;
- monitor risk indicators: address or key personnel changes more than twice in 12 months, disproportionate transactions, misalignment between the supplier's licensed activity and the subject of the supply.
Supply verification — transaction-level
Supply verification applies to each individual transaction above the thresholds. Per supply you must document:
- a genuine commercial reason for the supplier's involvement in the deal;
- that pricing and margins are commercially reasonable — benchmarked against comparable supplies;
- that the goods or services actually fit the supplier's licensed activity (a garage shouldn't be wholesaling electronics);
- the title and origin of the goods;
- the economic role of intermediaries — why they sit in the chain.
Documents to collect
For a standard supplier the baseline file includes incorporation and identity documents, address confirmation, authorised representative details and a documented payment method (electronic payments preferred; cash requires a documented reason). For counterparties with a 12-month aggregate above AED 375,000 you must add a bank confirmation letter from a UAE-licensed bank and a public reputation review. The whole bundle sits with the tax file and must be produced on FTA request — on equal footing with e-invoicing records under the UAE e-invoicing programme.
Mandatory internal KYS policy
Article 5 of Decision 13/2026 requires every VAT-registered business to maintain a written verification policy. The policy must allocate three roles: who performs the checks, who reviews them, who supervises the overall process. The decision does not mandate a dedicated in-house compliance officer — the function can be split across procurement, accounts payable and finance. What matters is that it is documented, not where it sits.
What you lose if you skip KYS
Decision 13 does not create a standalone penalty. The sanction is harder in practice: if the FTA concludes that a supply is linked to tax evasion and the business failed to run the required checks, the input VAT recovery on that supply is refused — permanently where the "knew or should have known" test is met. The exposure is economic, not administrative: VAT paid to the supplier stays in cost of goods and compresses the margin. For businesses close to the AED 375,000 threshold per counterparty, that already translates into real money.
Gulf News reports that in early audits after 1 October the FTA will look for a working process, not just a file — a routine, not a one-off audit before the return. Garant's recommendation is to encode the KYS routine as an internal procedure and refresh it in sync with the VAT return calendar.
