Legal Background and Implementation Timeline
The decision sets out executive regulations for Article 54 (bis) of the UAE VAT Law (Federal Decree-Law No. 8 of 2017). This statutory provision was introduced via Federal Decree-Law No. 16 of 2025, which came into force on January 1, 2026. It empowers the tax authority to deny input VAT recovery if a transaction is connected to tax evasion, even if the purchasing business was not directly complicit in the violation.
Failure to execute the due diligence checks outlined in Decision No. 13 triggers a statutory presumption that the buyer 'should have known' about the tax evasion, leading to the permanent forfeiture of input tax recovery rights for the transaction.
Reports indicate that the FTA Board of Directors approved the decision at its 45th meeting on June 23, 2026. Advisory firms including EY, Grant Thornton, BDO, and law firm Habib Al Mulla noted its signing and issue date as July 22, 2026, whereas PwC reported the issue date as August 22, 2026. The resolution was published on the FTA portal on August 20, 2026, with all sources confirming an effective enforcement date of October 1, 2026.
Financial Thresholds for Verification
The required scope and depth of verification are structured across three financial tiers:
| Financial Threshold (AED) | Classification | Legal Requirement |
|---|---|---|
| Less than 10,000 | Low-value exemption | Verification steps may be waived for individual transactions (excluding tax) |
| Above 100,000 | Cumulative exemption cap | Low-value exemption ceases to apply if total transactions with a supplier exceed this amount over a rolling 12-month period |
| Above 375,000 | Enhanced due diligence | Enhanced verification procedures mandatory if aggregate transactions exceed this threshold over 12 consecutive months |
Operational Rules and Action Items for Businesses
UAE businesses must initiate verification procedures during supplier onboarding and update them at least once every 12 months for ongoing commercial relationships. These rules are divided across three key areas:
1. Supplier Identity Due Diligence (Article 3)
- Individual suppliers: Obtaining valid identity documentation (passport or Emirates ID) and conducting an in-person or virtual meeting before transacting.
- Corporate suppliers: Verifying commercial registration in official databases, obtaining trade licenses/incorporation certificates, identifying authorized signatories, and confirming the physical existence of premises (electronically or via on-site visits).
- Risk indicators: Recording and maintaining written justifications if a supplier changes its registered address or key personnel more than 2 times within the past 12 months, or if transaction sizes are disproportionate to the company's scale.
- Enhanced checks (exceeding AED 375,000): Obtaining an unconditional written bank confirmation of an active account with a UAE-licensed bank, alongside conducting public records and media checks to identify any indicators of tax evasion.
2. Transaction and Supply Verification (Article 4)
- Commercial rationale: Documenting the commercial justification for the transaction and the rationale for selecting the specific supplier.
- Payment flows: Settling payments electronically or through banking channels; cash settlements, third-party payments, or transfers to overseas accounts require documented justification.
- Market pricing: Ensuring transaction pricing aligns with prevailing and customary open-market rates.
- Licensed activities: Verifying that the goods or services supplied match the authorized activities listed on the supplier's commercial license.
- Provenance and ownership: Tracking the origin and legal ownership of the supplied goods.
3. Internal Company Policy (Article 5)
Companies are required to establish a formal, written internal due diligence policy. The document must explicitly designate the personnel responsible for conducting, reviewing, and supervising verification workflows, detailing their exact duties and delegation of authority.
Practical Ambiguities in the Regulatory Framework
The text of the decision does not yet define explicit operational standards for 'electronic verification' or 'on-site visits' to a supplier's premises, nor does it detail specific documentation protocols for 'virtual meetings' with individual suppliers. Until the FTA issues further administrative guidance, businesses must define and govern these procedures through their internal compliance frameworks.
When does FTA Decision No. 13 of 2026 take effect?
The decision officially comes into force on October 1, 2026, and all qualifying transactions on or after this date must comply with the new verification requirements.
Which transactions are exempt from supplier due diligence?
Individual transactions valued at less than AED 10,000 (excluding tax) are exempt from verification, provided the aggregate transaction volume with that supplier does not exceed AED 100,000 within a rolling 12-month period.
What are the consequences of failing to perform supplier due diligence?
If tax evasion is identified within the supply chain, the failure to perform required checks creates a statutory presumption that the buyer ought to have known about the evasion, enabling the FTA to permanently disallow input VAT recovery.
This article is general information, not legal or financial advice. Rules change — confirm your own position with a qualified professional before deciding.
