VATPO48: Latest Public Clarification

No Verification, No Recovery: The FTA Puts Your Input VAT on Trial

A valid tax invoice is no longer enough. From 1 October 2026, if you cannot evidence who you bought from and why the deal made sense, a fraud anywhere in your supply chain can become your tax cost.

The Federal Tax Authority has published VAT Public Clarification VATP048, its guidance on FTA Decision No. 13 of 2026, which was issued on 22 July 2026 and took effect on 1 October 2026. The Decision gives operational teeth to Article 54(bis)(2) of the VAT Law: where a supply is found to be part of a chain linked to tax evasion, the FTA may reject your input tax deduction if you “should have been aware” of that link. VATP048 turns this test into a checklist. If you did not verify the supplier and the supply in the prescribed way, you will struggle to prove you were unaware. Input VAT recovery now rests on two pillars: a valid tax invoice and a documented verification trail. Lose the second, and the first may not save you.

1. The test is “should have been aware”, and an empty file counts against you. Under Article 54(bis)(2), the FTA may deny recovery where it establishes that a supply formed part of a chain related to tax evasion and the recipient should have known. The FTA still carries the burden of proving that evasion occurred (Article 51 of the Tax Procedures Law). Once it does, the question turns to you: did you follow the Decision No. 13 checks? VATP048 is candid that the Decision applies only where evasion has been established, and that the checks are not mandated on every supply. It nonetheless encourages businesses to build them into normal processes, because no one knows in advance which supplier will be the problem. Treat this as a standing control, not a contingency plan.
2. Individual suppliers: see the ID, meet the person. Where the supplier is a natural person, you must obtain valid proof of identity, such as an Emirates ID or passport. You must also meet the supplier, in person or by phone or video call, before the taxable supply is made.
3. Corporate suppliers: verify the entity and the person you deal with. For a legal person, confirm incorporation through official databases (the FTA cites the ADGM and DIFC registries) or obtain the certificate of incorporation or UAE trade licence. The details must be valid and match the entity’s name, address, employees and other information. You must also obtain ID for the director, agent or employee authorised to represent the supplier. Timing matters: verification is required on first dealing, and again for recurring suppliers not verified in the previous 12 months. Long-standing vendors are not exempt. They need an annual refresh.
4. Confirm a real place of business that fits the activity. Verify that the supplier has an actual place of business, using web mapping and navigation platforms or a site visit. The premises must also be compatible with what the supplier claims to do.
5. Screen for red flags and record your reasoning. The Decision lists three supplier risk indicators: more than two address changes in the previous 12 months; more than two changes of key employees (managers or the people you deal with) in the same period; and transactions that are disproportionate or unexpected in volume, value or nature compared with the supplier’s size and history.
6. Above AED 375,000: bank confirmation and a reputational review. Where supplies from one supplier exceeded AED 375,000 over the previous 12 months, or are expected to exceed it over the next 12, two further checks apply. First, obtain written confirmation from a UAE-authorised bank that the supplier holds an account, with no reservations or conditions. An IBAN letter issued to the supplier is sufficient; it need not be addressed to you. Second, review public reviews and media coverage from reliable sources, confirming they are consistent with the supplier’s size and business and show no signs of suspected evasion. For most large groups, this threshold captures every material vendor.
7. Interrogate the payment trail. Each taxable supply needs a general assessment confirming that the supplier’s involvement rests on genuine commercial reasons, and the payment terms must be commercially justifiable. Payments involving a third party, or to a bank account outside the supplier’s country of incorporation, need a reasonable explanation that is consistent with what you know. Payment should be electronic. Cash must have a documented commercial reason, stay within thresholds to be set by a Minister of Finance decision, and be easily verifiable. In Example 4, a bakery buying AED 60,000 of furniture receives three AED 20,000 invoices from different companies, each showing a different foreign bank account. It accepts “convenience” as the explanation without challenge. That is precisely the exposure the FTA describes.
8. Test the deal itself: price, licence and provenance. Prices or margins must not be significantly out of line with the market without a clear reason.
9. The AED 10,000 exception is narrower than it looks. Supply-level checks can be skipped where the consideration is below AED 10,000, excluding VAT. The relief falls away once total supplies from that supplier exceed AED 100,000 (excluding VAT) over the previous 12 months, or are expected to over the next 12. That is about AED 8,300 a month. Recurring vendors in facilities, IT and logistics will cross it quickly, so spend must be tracked per supplier on a rolling 12-month basis.
10. Document everything, and name who owns it. Every verification step must be documented, with supporting records retained so the FTA can confirm the steps were actually performed. You must also maintain a written policy naming who implements, reviews and supervises the procedures, with their powers and responsibilities, kept where your tax records are held.

This article is general guidance and does not constitute tax advice for any specific situation.