UAE VAT Know Your Supplier Rules

From 1 October 2026, UAE VAT-registered businesses must verify their suppliers and keep records of those checks, or the Federal Tax Authority (FTA) can reject their input VAT recovery

What Changed on 1 October?

Under FTA Decision No. 13 of 2026, issued on 22 July 2026, businesses must meet Know Your Supplier (KYS) requirements under Article 54(bis) before claiming input VAT.

1. The supplier is a genuine business
2. The transaction makes commercial sense

The checks alone are not enough. You must also keep evidence that you carried them out.

Why Does the FTA Want This?

The aim is to stop VAT fraud in supply chains. If a supplier, or anyone further up the chain, turns out to be involved in tax evasion, your documented checks protect you. They show you acted in good faith, so your input VAT claim can still stand.

Who Must Comply?

there is a relief: you can skip the checks for supplies under AED 10,000 (excluding VAT). But the relief does not apply if your total purchases from that supplier exceed AED 100,000 in the past 12 months, or are expected to in the next 12.

What Are the Key AED Thresholds?

Three figures decide how much checking you must do for each supplier.

Which Businesses Feel It Most?

The heaviest impact falls on businesses with many or frequently changing suppliers.

How Do You Stay Compliant? Your Verification Checklist

•  Identity: For individuals, get an Emirates ID or passport copy and meet them, in person or virtually, before the supply. For companies, confirm incorporation through official databases or the certificate, and get ID for the person representing them
• place of business: Confirm a real premises, by electronic means or a site visit, that suits the business activity.
• Risk indicators: Flag suppliers that changed address or key staff more than twice in 12 months, or whose deals look too big or unusual for their size. If a flag applies, keep a written, justified explanation for the FTA.

Check every supply:

• Commercial logic: The supplier's role, including any intermediary role, must have a genuine business reason
• Payment: Pay electronically. Cash needs a documented reason and must stay within legal limits. Third-party payments or foreign bank accounts need a clear explanation.
• Price: Prices and margins should be close to market, or the gap must be explainable.
• Licence scope: The goods or services must fall within the supplier's licensed activity. 
• Goods: Confirm their origin, authenticity and the supplier's right to sell them.

Keep the paper trail:

• Document each check and keep supporting records.
• Maintain a written policy naming who carries out, reviews and supervises the checks.

Common Mistakes to Avoid

• Checking suppliers but not recording the checks
• Treating every purchase under AED 10,000 as exempt, even from suppliers you spend over AED 100,000 with
• Verifying a supplier once and never again (re-verify at least every 12 months)
• Paying in cash without a documented reason Having no written policy naming who runs and reviews the checks
• Treating a valid TRN as proof that the whole deal is genuine

Key Takeaways

KYS shifts part of the anti-fraud responsibility to buyers. Businesses that verify suppliers, test transactions and keep clear records protect their input VAT. Businesses that don't risk paying for someone else's fraud.

Protect Your Input VAT Before It's Questioned

With over 15 years of experience in UAE tax advisory, Legacy Partners, an authorized representative, Book a consultation with our VAT team today info@legacypartners.ae

Frequently Asked Questions

Updated On: 26 Oct, 2026