Core Theme of this blog

1. Why Procurement & Payables Are High-Risk
2. Key Compliance Risks in Payables
3. Six Essential VAT Controls for AP Teams
4. How to Build a Culture of Compliance

Why Procurement & Payables Are High-Risk

In the UAE, many businesses treat VAT compliance as an “after-the-fact” process handled only during return filing. In reality, compliance begins much earlier — right at the procurement and payables stage.

Accounts Payable (AP) teams are the first line of defence in ensuring that VAT is correctly validated, coded, and recorded. Common pitfalls — such as incomplete invoices, unverified supplier TRNs, or late adjustments — can easily result in disallowed VAT claims and FTA penalties.

Building robust AP controls is no longer optional. With the FTA intensifying audits and cross-checks, businesses need to focus on preventing errors before they reach the VAT return.

Key Compliance Risks in Payables

Here are the most common areas where companies in the UAE face VAT challenges

1. Invoice Errors – Missing “Tax Invoice” wording, absent TRNs, or incorrect VAT amounts.
2. Supplier TRN Issues – Paying VAT to an unregistered supplier makes the tax non-recoverable.
3. Incorrect Exchange Rates – Foreign invoices not converted at Central Bank rates.
4. Unprocessed Credit Notes – Failing to reduce input VAT when suppliers issue credits.
5. Reverse Charge Oversights – Imported services not self-accounted for under RCM.
6. Import VAT Documentation – Customs evidence missing for VAT recovery.
7. Late Input VAT Claims – Delayed invoice booking outside the permitted tax period.
8. Six-Month Payment Rule – Claimed VAT not reversed when suppliers remain unpaid.
9. Blocked Input VAT – Entertainment, staff perks, and personal vehicles incorrectly claimed.
10. Wrong VAT Coding – Invoices misclassified in ERP, leading to misreported returns.

Each of these risks is avoidable with the right checks and discipline in place.

Six Essential VAT Controls for AP Teams

• Valid Tax Invoices Only – Verify all mandatory details before booking.
• Verify Supplier VAT Registration – Always confirm TRNs on FTA portal.
• Check VAT Calculations – Confirm 5% math on every invoice.
• Apply Reverse Charge Mechanism – For imported services, self-account correctly.
• Monitor Six-Month Rule – Reverse VAT on unpaid invoices promptly.
• Maintain Accurate VAT Coding – Use correct ERP tax codes consistently.

These six practices form the foundation of a compliant AP process.

Building a Culture of Compliance

VAT compliance is not just about ticking boxes — it is about building trust with regulators, protecting profitability, and avoiding future disputes. Companies should

• Train AP staff regularly on VAT rules.
• Establish approval workflows for invoice processing.
• Automate TRN checks where possible.
• Reconcile customs and import VAT data periodically.
• Archive all invoices and supporting documents for 5–15 years.
• Stay updated on new FTA clarifications and Cabinet Decisions.

By embedding these practices, businesses can transform VAT compliance from a reactive exercise into a proactive safeguard.

Conclusion

For UAE companies, procurement and payables are no longer just operational functions — they are critical compliance touchpoints. By enforcing robust VAT controls, businesses not only safeguard their input tax recovery but also strengthen their financial governance.

In today’s regulatory landscape, one principle stands clear: Proactive compliance is always less costly than reactive correction.