Building Trust into the VAT Chain: The UAE’s Evolving Approach to Supply Chain Integrity

Transaction Advisory Services

October 1, 2026

Building Trust into the VAT Chain: The UAE’s Evolving Approach to Supply Chain Integrity

For most businesses, input value-added tax (VAT) recovery has traditionally been approached through familiar questions: Was VAT charged correctly? Is there a valid tax invoice? Have the usual recovery conditions been met?

The UAE VAT framework adds a consideration: How much does the business know about the supplier and the supply behind that invoice?

Article 54(bis) of the UAE VAT Law, together with VAT Public Clarification VATP046 and FTA Decision No. 13 of 2026, places greater emphasis on the integrity of the supply chain. In practical terms, businesses should be able to provide evidence that prescribed checks were carried out on suppliers and taxable supplies before input VAT was deducted.

Businesses should assess whether existing vendor onboarding, procurement, finance, legal, compliance and risk processes cover the new requirements, identify gaps and ensure the checks performed can be evidenced. Decision No. 13 takes effect from 1 October 2026.

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VAT is collected progressively through the supply chain. A supplier charges VAT to a customer, reports it and pays it to the Federal Tax Authority (FTA); the customer may recover the VAT incurred, subject to recovery rules. In a compliant chain, VAT is ultimately borne by the final consumer.

But what happens when the chain does not work as intended? For example, a supplier may collect VAT but fail to report or pay it, yet the customer still seeks to recover the VAT. The risk is greater when artificial transactions or documents support claims without genuine underlying activity.

This illustrates why VAT cannot always be viewed as a series of isolated invoices. A document may be correct in form, but the transaction behind it may still require scrutiny.

What Has Changed?

Article 54(bis), effective from 1 January 2026, addresses input VAT recovery linked to tax evasion. Where the FTA establishes that a supply, or a chain of supplies of which it forms a part, is related to tax evasion and the taxable person knew of that connection, the input VAT deduction must be rejected. Where the taxable person should have known, based on the circumstances, the FTA may reject the deduction.

The provision also creates an important deeming rule. A taxable person is treated as having been required to know of the connection where it did not verify the validity and integrity of the supplies before recovering the input VAT. VATP046 further confirms that the relevant supply chain is not limited to the business’s immediate supplier or customer; it can extend to other persons in the wider chain connected with the tax evasion.

Decision No. 13 of 2026 provides the practical framework for that verification and applies from 1 October 2026. It does not require a business to guarantee every supplier’s compliance. It prescribes steps for understanding who the supplier is, what is being purchased and whether the transaction makes commercial sense, and documenting those checks before input VAT is deducted.

What Should Businesses Focus on Now?

At the supplier level, businesses need to verify identity and business presence. This can include identification, incorporation details, authorised representatives and the supplier’s place of business. Decision No. 13 also identifies risk indicators, including repeated changes in address or key personnel, and transactions that appear disproportionate or unexpected compared with the supplier’s size or business history.

At the supply level, the focus is commercial. Is there a genuine reason for the supplier’s involvement? Are payment arrangements commercially justifiable? Is the pricing broadly consistent with market conditions? Is the supply within the supplier’s ordinary or licensed activities? For goods, the checks extend to authenticity, origin and the supplier’s ownership or right to dispose of them. Where an intermediary is involved, there should be a clear commercial explanation for its role.

The timing and thresholds are also important. The prescribed checks on a supply are required to be completed and documented before recovering the input VAT from such supply. Supplier verification is required when dealing with a supplier for the first time and when the supplier has not been verified during the previous 12 months. Each taxable supply received or accepted must be verified under the supply level requirements. A taxable supply below AED 10,000, excluding VAT, may fall within an exception, but that exception does not apply when supplies from the same supplier exceed, or are expected to exceed, AED 100,000 over the relevant 12-month period.

When supplies exceed, or are expected to exceed, AED 375,000 over 12 months, additional supplier checks apply, including bank account confirmation and a review of reliable publicly available reviews and media coverage.

Evidence is central. Businesses must document verification steps, retain supporting records and maintain a policy identifying who performs, reviews and supervises the procedures.

For many organisations, much of this may already sit within vendor onboarding, procurement, finance, risk or compliance processes. The practical question is whether those controls meet the requirements of Decision No. 13, operate consistently and, importantly, whether the business can prove during an FTA audit that the required checks were actually performed before recovering the input VAT.

The Way Forward

Businesses should treat Decision No. 13 as an implementation project rather than a narrow tax-policy update. Relevant teams should assess current processes, identify gaps, assign responsibilities and embed checks into existing workflows wherever required.

The objective is not paperwork for its own sake. It is a connected and defensible control framework that allows a business to demonstrate that appropriate checks were performed before input VAT was recovered.

The invoice still matters; it is simply no longer the whole story.

Kroll provides comprehensive tax advisory services, helping businesses navigate complex tax matters, manage risk and support transactions, structuring and ongoing compliance requirements. To discuss this further and understand how Kroll can help you with Decision 13 of 2026 please connect with our team.

This publication is intended for general information only and does not constitute legal, tax, financial or other professional advice. No reliance should be placed on the information contained herein without obtaining advice specific to your circumstances.

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