Two sets of UAE VAT rules took effect together on 1 October: Cabinet Decision No. 149, which amends the VAT Executive Regulation, and UAE Federal Tax Authority (FTA) Decision No. 13, which sets out the procedures for verifying a supplier and a transaction before input tax is recovered.
For Korean groups with a subsidiary or branch in the UAE, Decision No. 13 is the one that bites. Holding a tax invoice no longer secures the input tax credit on its own — the file must also show that the supplier was verified. On the Executive Regulation side, the practical issues are cash payments, employee accommodation and bundled supplies.
1. When the rules apply
Cabinet Decision No. 149 was issued on 1 September 2026 and applies from 1 October 2026 (Article 3(1)). FTA Decision No. 13 took effect on the same date (Article 7). In other words, both already apply to October transactions.
There is one exception. For businesses making both taxable and exempt supplies, the input tax apportionment method (Articles 55(6), 55(7) and 55(19) of the Executive Regulation) applies from the first tax year beginning on or after 1 October 2027 (Article 3(2)).
2. Supplier verification: who, what and from what amount
The starting point is the VAT law amendment that took effect on 1 January 2026 (Federal Decree-Law No. 16 of 2025). As the Ministry of Finance explains it, a taxable person must verify the legitimacy and integrity of a supply, following the procedures set by the FTA, before recovering input tax. The FTA may deny recovery where it finds the supply formed part of a tax evasion arrangement. Decision No. 13, issued on 22 July 2026, sets out those procedures.
Three things must be checked about the supplier (Article 3).
- Identity: for a legal person, confirm incorporation through an official database or the certificate of incorporation, and obtain a copy of the identification document (Emirates ID or passport) of the person representing the supplier. For a natural person, obtain a copy of the identification document and meet the supplier in person or by video call before transacting.
- Place of business: confirm that a genuine place of business exists, by electronic means or a site visit, and that it is consistent with the activity carried on there.
- Risk indicators: check whether the supplier has changed its address or key personnel more than twice in the past 12 months, and whether the transaction is unusually large or otherwise atypical given the supplier's size or track record. Where an indicator is present, keep a reasonable explanation on file and provide it to the FTA on request.
Where supplies received from a single supplier have exceeded, or are expected to exceed, AED 375,000 over 12 months, two further steps apply. Obtain from the supplier a bank account confirmation letter issued by a UAE bank, and review publicly available reputation information and media coverage from reliable sources (Article 3(4)). The confirmation letter need not be addressed to the recipient.
Certain checks apply to each supply (Article 4). Confirm that the transaction has a genuine commercial purpose. Payment must be made by electronic means; if it is made in cash, there must be a documented commercial reason and the payment must stay within the limit set under the tax legislation. Check that the price or margin does not deviate materially from the market without reason, and that the transaction falls within the scope of the supplier's licence. For goods, also confirm that they are genuine and that the supplier has the right to dispose of them.
Supplier verification is carried out before the first transaction, and repeated where no verification has been performed in the previous 12 months. Supplies are verified transaction by transaction. The verification process and its supporting evidence must be retained. An internal policy document is also required, setting out who performs, reviews and supervises the process (Article 5).
Small amounts are carved out. A supply with consideration of less than AED 10,000 excluding VAT may be exempted from these procedures (Article 6(1)). The exemption does not apply, however, where supplies received from that supplier have exceeded, or are expected to exceed, AED 100,000 over 12 months (Article 6(2)). That is why the test has to be run on a rolling total per supplier, not on individual invoice values.
Article 51 of the Tax Procedures Law places the burden of proving the accuracy of a return on the taxable person. If the supplier verification is not documented, there is no way to demonstrate at the audit stage that it was ever performed.
3. Three Executive Regulation changes that affect day-to-day work
Cash payments
A new Article 54(3) has been added. Input tax cannot be recovered where the consideration for a supply above an amount set by Ministerial Decision has been, or will be, paid in cash. The threshold and the detailed controls are left to that Ministerial Decision.
Employee accommodation
Input tax on employee benefits that are mandatory under labour law remains recoverable. The amended Article 53(1)(c)(1), however, removes employer-provided accommodation from that category. Recovery is available only where a decision or guidance of the Ministry of Human Resources and Emiratisation (MOHRE) makes the provision of accommodation mandatory. Employee benefits provided under a contractual obligation or a documented internal policy are subject to the cases and conditions determined by the FTA (Article 53(1)(c)(2)). FTA Decision No. 17 of 2026 deals separately with input tax recovery on employee expenses.
Bundled supplies
The new Article 4(6) treats a supply with multiple components as a single composite supply where, by its nature and economic reality, the components are linked and cannot be separated. The rate follows the principal component. Contracts that have invoiced differently rated components separately need to be revisited.
4. Other amended provisions
- Capital assets (Article 57(1)): the thresholds remain as before — cost of AED 5,000,000 or more excluding tax, with a useful life of 10 years for buildings and 5 years for other assets. The definition has changed from "a single item of expenditure" to "a business asset", and the cross-references to the VAT law have been tidied up.
- Apportionment (Articles 55(6), (7) and (19)): the recoverable proportion is calculated by reference to taxable supplies as a share of total supplies. Supplies of capital assets and receipts of goods and services falling under Article 48 of the VAT law are excluded from the calculation, and the percentage is rounded to the nearest whole number. Government entities and charities follow the method in paragraph 19. As noted above, this applies from tax years beginning on or after 1 October 2027.
- Financial services (Article 52(2)): for input tax recovery on financial services supplied to customers outside the UAE, a customer is treated as being outside the UAE where any presence in the UAE is shorter than 30 days and is not effectively connected with the supply. The previous wording referred only to a "short-term presence".
- Healthcare supplies (Article 41(4)): the zero-rating scope has been restated to cover medical products specified by Cabinet Decision, together with goods supplied in connection with, and necessary for, zero-rated healthcare services.
- Profit margin scheme (Article 29(5)): the purchase price may include costs and fees incurred in acquiring the goods, but only where the input tax on those costs is not recoverable.
- Tax credit notes (Article 60(1)(a)): the document must clearly display the words "Tax Credit Note".
The VAT law amendment that took effect on 1 January removed the requirement to issue a self-invoice when applying the reverse charge, replacing it with an obligation to retain evidence relating to the supply. A five-year time limit now applies to claims for refund of excess recoverable tax remaining after offset.
5. What to check now
- Add a rolling 12-month total per supplier to the vendor master, and start verification with those above AED 375,000 and AED 100,000
- Decide where supplier verification sits in the purchase approval workflow, and draft a policy document naming who performs, reviews and supervises it
- Identify transactions settled in cash and assess whether they can be moved to bank transfer
- If input tax on employee accommodation has been recovered, confirm whether provision is mandatory under a MOHRE decision or guidance
- Revisit the rate treatment of contracts that invoice multiple components separately
- Check the ERP template to confirm that credit documents carry the words "Tax Credit Note"
Closing
These amendments change the conditions for recovering input tax. A tax invoice alone is no longer enough; the file must also show that the supplier and the transaction were verified. The rules already apply to October transactions, so if no verification process is in place yet, the practical course is to start with the suppliers carrying the largest rolling totals.
This article summarises the published legislative texts and Ministry of Finance announcements. The detailed requirements of Decisions No. 13 and No. 17 apply differently depending on sector and transaction structure, so we recommend a separate review of individual cases.