FTA Decision 13 sets Know Your Supplier checks for input VAT claims

From January 1, 2026, the UAE Federal Tax Authority can reject an input VAT credit if a transaction was part of a supply, or supply chain, linked to tax evasion and the taxpayer should have been aware of that link. If a business fails to carry out the required supplier or transaction checks, it may be treated as having “should have been aware” of the tax evasion.

The procedures for these checks are set out in FTA Decision No. 13 of 2026, effective October 1, 2026, a process referred to as Know Your Supplier (KYS). KYS requires businesses to verify a supplier annually and check each supply transaction. Businesses must carry out and document these checks, maintain an internal KYS policy, and appoint an in-house compliance officer. KYS is not required below the specified thresholds of Dh100,000 and Dh10,000.

There is uncertainty over how widely KYS applies. Some businesses are conducting checks on all suppliers to protect input VAT claims. Established suppliers such as banks, telecom companies, utilities and licensing authorities could receive large numbers of verification requests, creating a heavy administrative burden. The burden of proof remains on the business: it must produce documented KYS checks or risk losing its input VAT claim if tax evasion is later discovered in the supply chain.

The “should have known” principle follows the European Court of Justice’s Kittel principle. The FTA decision is seen as helpful because it sets out a detailed process compared with some other tax jurisdictions. Other measures include the reverse-charge mechanism for domestic business-to-business supplies of jewellery, metal scrap and electronic devices, and full e-invoicing by mid-2027.