UAE VAT "Know Your Supplier" Rules: Check Your Suppliers or Lose Your Input VAT
The rule in one line: 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?
The FTA has introduced Know Your Supplier (KYS) requirements. Before claiming input VAT, a business must be able to show it checked two things:
- The supplier is a genuine business
- 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.
Without records, a fraud somewhere in your supply chain can become your tax loss.
Who Must Comply?
All VAT-registered businesses in the UAE, whatever their size or sector.
There is a helpful relief: transactions below AED 10,000 are exempt from the checks, which keeps the admin load lighter for smaller purchases.
What Are the Key AED Thresholds?
Three figures decide how much checking you must do for each supplier.
| Threshold | What it means |
| Under AED 10,000 per supply (excl. VAT) | Checks can be skipped |
| Over AED 100,000 per supplier in 12 months | The AED 10,000 relief no longer applies |
| Over AED 375,000 per supplier in 12 months | Extra checks: a bank letter confirming the supplier's UAE account, plus a review of public reviews and media coverage |
Which Businesses Feel It Most?
The heaviest impact falls on businesses with many or frequently changing suppliers.
| Business type | Why the impact is higher |
| Contractors | They work with many subcontractors |
| Trading and distribution firms | They buy from a large, changing pool of suppliers |
| SMEs | Most have no formal vendor checks today and must build them from scratch |
| Multinationals | Lower impact, as vendor onboarding checks often already exist |
How Do You Stay Compliant? A 5-Step Checklist
- Verify registration: Confirm the supplier's trade licence and Tax Registration Number (TRN).
- Test the deal: Check that price, quantity and terms are commercially reasonable.
- Watch for red flags: New suppliers with no track record, unusually low prices or requests to pay third parties.
- Documenteverything: Save licences, TRN screenshots, contracts and your review notes.
- Recheck regularly: Repeat checks when suppliers change or transaction patterns shift.
Common Mistakes to Avoid
- Checking suppliers but not recording the checks
- Assuming small businesses are exempt (only transactions under AED 10,000 are)
- Running checks once at onboarding and never again
- Treating a valid TRN as proof that the whole deal is genuine
Protect your in put VAT Before it's Questioned
With over 15 years of experience in UAE tax advisory, Legacy Partners, an authorised representative, helps businesses build practical Know Your Supplier processes, review supplier files and stay audit-ready with the FTA. Book a consultation with our VAT team today info@legacypartners.ae
Frequently Asked Questions
Updated On: 12 Oct, 2026
