UAE Know Your Supplier (KYS) VAT Rules 2026: FTA Guide

The 60-second answer

From 1 October 2026, Federal Tax Authority (FTA) Decision No. 13 of 2026 sets out verification measures for taxable persons before deducting input VAT on supplies they receive. A tax invoice remains important, but the decision also calls for checks on the supplier and the supply itself. The rules give practical effect to Article 54 bis of the UAE VAT Law, which addresses input tax claims connected with tax evasion in a supply chain.

The key numbers are AED 10,000 for the small-supply exception, AED 100,000 for cumulative supplier spend that removes that exception, and AED 375,000 for additional bank and public-information checks. These are different from the AED 375,000 VAT registration threshold. Review the actual text and your facts before changing a VAT claim.

What Article 54 bis means for input VAT recovery

Article 54 bis requires the FTA to reject a deduction where it establishes that a supply or supply chain was connected with tax evasion and the taxable person knew of that connection. It permits rejection where, considering the circumstances, the person should have known. Failure to carry out prescribed verification can make the person deemed to have been required to know for that second test.

The decision is therefore a verification framework, not an automatic fine for every missing document. Equally, an incomplete file can weaken the evidence needed to support an input tax deduction if a supply-chain issue emerges. Existing input VAT conditions continue to apply.

Which suppliers must you verify, and how often?

Article 3 requires identity, business location and risk checks appropriate to the supplier. For a legal person, verify incorporation through an official database or obtain a valid incorporation certificate, check the relevant details, and verify the identity of the authorised director, agent or employee. For a natural person, obtain valid identity evidence and meet them in person or virtually before the supply.

Check that the supplier has an actual place of business compatible with its activity. The decision also highlights repeated changes of address or key employees and transactions inconsistent with the supplier's scale or history. Where such an indicator appears, retain a clear, evidence-based explanation.

Article 5 requires supplier verification when first dealing with the supplier and again on recurrent dealings if the supplier has not been verified during the previous 12 months. Build the date into your supplier register so checks do not go stale.

What must be checked for each supply?

For each taxable supply received or accepted, assess whether the transaction has a genuine commercial reason. Review whether the payment method and terms make business sense. Third-party payment arrangements, payments to an account outside the supplier's country of incorporation, and cash payments need the explanations and evidence specified in Article 4.

Also assess prices or margins that differ significantly from market conditions, whether the goods or services match the supplier's ordinary or licensed activity, and the authenticity and origin of goods where relevant. If an intermediary is involved, document its commercial role. Keep contracts, purchase orders, delivery or service evidence, payment records and a short review note where they support those checks.

The AED 10,000 and AED 100,000 exception

Article 6 lets a taxable person disregard the decision's measures for a taxable supply with consideration below AED 10,000, excluding VAT. This is an exception from these prescribed verification measures, not an exemption from VAT or a blanket right to deduct input tax.

The exception does not apply if the total value of supplies received from the same supplier exceeds AED 100,000 in the previous 12 months, or is expected to exceed AED 100,000 in the next 12 months. The wording is 'exceeds': an amount exactly equal to AED 100,000 is not described as exceeding it. Expected spend matters, so a committed annual contract can change the assessment before the running total passes the line.

Example: monthly purchases of AED 9,500 total AED 114,000 over 12 months. Although each invoice is below AED 10,000, the cumulative test must be considered. The decision does not expressly say that earlier claims become invalid automatically when a later threshold is crossed; assess the timing and evidence for each claim on its facts.

What changes above AED 375,000?

Where supplies received from one supplier exceed AED 375,000 over the previous 12 months, or are expected to exceed that amount over the next 12 months, Article 3 adds two checks. Obtain written confirmation from an authorised UAE bank that the supplier has a bank account, without relevant reservations or conditions. Review reliable public reviews and media coverage for consistency with the supplier's business and possible tax-evasion indicators.

The bank confirmation does not have to be addressed to the customer. The AED 375,000 figure here measures purchases from a supplier; it should not be confused with the separate turnover test for mandatory VAT registration.

A practical seven-step KYS workflow

1. Map supplier spend over the previous 12 months and expected commitments over the next 12 months. Flag the AED 100,000 and AED 375,000 tests.

2. Verify supplier identity, incorporation or personal identity, authorised representative, actual place of business and activity.

3. Record and investigate the risk indicators in Article 3, including repeated changes and unusual transaction scale.

4. Review each relevant supply's commercial purpose, price, goods or service evidence, payment route and any intermediary role.

5. For suppliers above the AED 375,000 test, obtain the bank confirmation and assess reliable public information.

6. Save the steps taken, supporting documents, explanations and dates in a retrievable supplier and transaction file.

7. Recheck suppliers on recurrent dealings when the last verification is more than 12 months old, and keep monitoring expected and actual spend.

The written policy and responsibility for checks

Article 5 requires a documented policy identifying who implements, reviews and supervises verification, with clear powers and responsibilities. Keep that policy at the designated location for required records. Naming an internal owner and escalation contact is a sensible way to put the rule into practice, but the decision does not expressly require a specially titled in-house 'KYS compliance officer'.

The policy should say which evidence is collected, how small-supply and cumulative thresholds are monitored, who reviews red flags, and how decisions and files are retained. A policy only helps if purchasing and finance teams actually use it.

TRN checks, red flags and payment evidence

The FTA's online TRN verification service is a useful supporting control: compare the number and supplier identity on the invoice with the result and save a dated record. A TRN check alone does not establish that the supplier's place of business, commercial capacity or the particular supply is genuine.

Escalate unexplained price differences, activity mismatches, repeated address or personnel changes, weak delivery evidence, third-party payments and demands for cash. The decision generally calls for electronic payment; cash must have a documented commercial reason, remain within applicable legal thresholds and be easily verifiable. There is no simple 'two red flags means automatic denial' rule in the decision.

What UAE businesses should do now

Start with suppliers and claims that present the greatest exposure. Reconcile your supplier master file with contracts and invoice data, set rolling-spend alerts, obtain missing identity and business evidence, and record a reviewer and review date. For suppliers likely to cross AED 375,000, request bank confirmation early. Train accounts payable staff to escalate unusual payment routes and supplies that do not match the supplier's business.

TaxBay Accounting LLC can help map suppliers, design a documented verification policy, review VAT records and prepare a practical evidence file. Contact our Dubai team to discuss your circumstances before your next input VAT claim.