UAE explains supplier checks needed to protect input VAT recovery

The clarification protects recovery only after evasion is established

Article 54 bis(2) of the VAT Law permits the FTA to reject recoverable input tax where a supply formed part of a supply chain connected with tax evasion and, from the circumstances, the taxable person should have known of that connection. VATP048 emphasises that Decision No. 13 applies only after the FTA establishes tax evasion. Following the prescribed checks can then demonstrate that the recipient neither knew nor could reasonably have been expected to know of it.^[1]

Supplier and supply checks must address commercial reality

The verification covers both the supplier and each taxable supply. For a supplier, the recipient should verify identity or incorporation, the authorised representative, actual business premises and risk indicators. For the supply, it should assess whether the transaction has genuine commercial reasons, whether payment arrangements are commercially explicable, whether prices or margins differ materially from market conditions, whether the goods or services fit the supplier’s licensed activities, and—where relevant—the authenticity, origin and ownership of goods or the commercial reason for an intermediary’s involvement.^[1][2]

Checks need ownership, records and periodic renewal

Checks should be documented. Decision No. 13 also requires a retained policy identifying who implements, reviews and supervises the procedures. Supplier verification is required on first dealing and again where the supplier has not been checked during the previous 12 months.^[1]

Low-value supplies have a constrained exception

The supply-level check is not required where consideration is below AED10,000 excluding VAT, provided supplies from the same supplier do not exceed AED100,000 over the previous 12 months and are not expected to exceed that amount over the following 12 months. Groups should therefore map UAE input-VAT recovery, supplier-onboarding evidence and threshold monitoring. The clarification creates no new VAT-return or payment deadline.^[1]