Quick Answer
What is the requirement? Before deducting input VAT, a VAT-registered business must verify its supplier and the purchase itself, and keep records of those checks.
Why does it exist? The Federal Tax Authority (FTA) can refuse an input VAT claim if the purchase was part of a supply chain linked to tax evasion and the buyer knew, or should have known, about it.
Who must comply? Every business that is registered, or required to register, for UAE VAT.
What gets checked?
- The supplier: identity, real place of business, and warning signs
- Larger suppliers: a bank confirmation and a review of their public reputation
- Each purchase: a genuine business reason, a fair price, sensible payment, and a good match with what the supplier is licensed to do
Is there a small-purchase exception? Yes. Purchases below AED 10,000 (excluding VAT) can skip the checks, unless the supplier’s total sales to you exceed AED 100,000 in 12 months.
What do you need to keep? Proof of every check, plus a written internal policy naming who is responsible.
Verifying Supplies
Fraudsters sometimes create paper trails of invoices between shell companies to generate VAT refunds they are not entitled to. An honest business can end up in the middle of such a chain without realising it. The FTA wants buyers to take reasonable steps to avoid that and to prove they did.
The rules ask you to confirm two things:
1. The supplier is real and credible.
2. The purchase makes genuine commercial sense.
These checks sit on top of the usual conditions for recovering input VAT, such as holding a valid tax invoice.
Part One: Checking the Supplier
When do you check?
- The first time you deal with a new supplier.
- When you buy again from a supplier you have not verified in the last 12 months.
In practice, that means you should re-verify every active supplier at least once a year.
The core checks (all suppliers)
| What to check | If the supplier is an individual | If the supplier is a company |
|---|---|---|
| Identity | Get a copy of a valid Emirates ID (EID) or passport, and meet them (in person or by video call) before the first supply. | Confirm the company exists using official registers or a trade licence/incorporation certificate. The name, address and other details must all match. Also collect a copy of the EID or passport for the person representing the company. |
| Place of business | Confirm a real place of business exists, using online tools or a site visit. It should fit the type of work they claim to do. | Same |
| Warning signs | Look for the red flags below. | Same |
The three red flags
Watch for a supplier who, in the past 12 months:
1. Changed address more than twice.
2. Changed key people more than twice. This covers managers or the staff you deal with.
3. Handled transactions that look out of proportion to their size, history or normal line of business.
A red flag does not automatically mean you cannot claim. But if one appears, you must write down a clear, reasonable explanation, keep it on file, and give it to the FTA if asked. The explanation must not contradict other information you hold about the supplier.
Extra checks for larger suppliers
If you bought more than AED 375,000 from a supplier in the last 12 months, or expect to in the next 12 months, add two more steps:
- A bank confirmation. Get a written letter from a UAE-authorised bank confirming the supplier holds an account. It must be free of reservations or conditions. It does not have to be addressed to you.
- A reputation check. Review reliable public information such as online reviews and news coverage. Make sure it fits the size and nature of the supplier’s business and shows no signs of suspected tax evasion.
Part Two: Checking Each Purchase
Verifying the supplier is not enough. Each taxable purchase you receive or accept also needs to pass these tests:
| Area | What you are confirming |
|---|---|
| General sense | The deal has a genuine commercial purpose, and the supplier’s role in it makes sense. |
| Payment method | Payment is justified. If a third party is involved in receiving payment, or the money goes to a bank account outside the supplier’s home country, you need a reasonable explanation that fits the facts you hold. |
| How you pay | Payment should be electronic. Cash is only acceptable with a documented business reason, within the limits set by UAE tax rules, and easy to trace. |
| Price | The price or profit margin is not suspiciously far from normal market levels without a clear reason. |
| Supplier’s scope | The goods or services fall within what the supplier normally does and what their licence allows. |
| Goods | You are satisfied the goods are genuine, where they came from is clear, and the supplier actually owns them or has the right to sell them. |
| Middlemen | If the supplier is acting as an intermediary, there is a clear business reason for them being in the chain. |
Small-Purchase Exception
You may skip all of the above for a taxable purchase where the price, excluding VAT, is under AED 10,000.
The exception does not apply if the total you buy from that supplier is more than AED 100,000 over the past 12 months, or you expect it to be over the next 12 months. Many small invoices from one supplier can add up to a large relationship.
What You Must Keep
1. Evidence of every check. Keep copies of IDs, registry extracts, bank letters, site-visit notes, screenshots and similar records.
2. A written verification policy. It should say who carries out the checks, who reviews them, who supervises, and what authority each person has. Store it where your tax records are kept.
If the FTA challenges a claim, your file is your defence.
Worked Examples
Example 1: The freelance designer
Your marketing agency hires a freelancer for an AED 30,000 branding project. Before the first job, you collect a copy of the freelancer’s EID, hold a video call, and confirm their studio address. You pay by bank transfer. You file everything with the invoice, then claim the VAT.
Example 2: Small purchase, big relationship
A café buys AED 6,000 of packaging from a supplier. That is under AED 10,000, so the exception looks available. But the café buys from this supplier every month and spends about AED 150,000 a year. Because that passes AED 100,000, the exception does not apply, and the full checks are required.
Example 3: The supplier that keeps moving
A construction firm’s steel supplier has moved premises three times this year and changed its sales contact twice. Two red flags apply. The firm asks the supplier why, and learns the company outgrew two warehouses after landing a major contract, which is confirmed by public news. The firm saves this explanation in its file.
Example 4: A high-value supplier
A trading company expects to spend AED 500,000 with a new logistics provider over the year. Beyond the identity and premises checks, it obtains a bank confirmation letter without conditions and reviews the provider’s online reputation. Both go on file.
Common Mistakes to Avoid
1. Relying on the TRN alone. A tax registration number on an invoice is a start, not proof the supplier is genuine.
2. Checking once and forgetting. Active suppliers need re-verification at least every 12 months.
3. Ignoring red flags. If something looks off, record your reasoning. Silence looks worse than an explanation.
4. Paying cash for convenience. Cash needs a documented business reason and must stay within the legal limits.
5. Forgetting that purchases add up. Many small invoices can push a supplier over the AED 100,000 line.
6. Having no written policy. A policy is a requirement in itself, not a nice-to-have.
7. Leaving checks in people’s heads. If it is not documented, it did not happen.
Frequently Asked Questions
What is the input VAT verification rule in the UAE?
Businesses registered for VAT must verify their suppliers and each taxable purchase before deducting input VAT, and keep proof of these checks.
Is a valid tax invoice still enough to claim input VAT?
A valid tax invoice is still necessary, but it is not always sufficient on its own. If a purchase is linked to tax evasion and you did not carry out the required checks, the FTA can refuse your claim.
Who has to follow these rules?
Any business that is registered for VAT, or obliged to register, in the UAE.
How often must I verify a supplier?
When you first deal with them, and again whenever you buy from a supplier you have not verified in the last 12 months.
What documents do I need for an individual supplier?
A valid EID or passport copy, and a meeting with them (in person or virtual) before the first supply.
What do I need for a company supplier?
Proof the company exists (from an official database or its incorporation documents, with details that match), plus an EID or passport copy for its authorised representative.
When is a bank letter required?
When your purchases from a supplier exceed AED 375,000 in the previous 12 months, or you expect them to in the next 12 months. The letter must come from a UAE-authorised bank, confirm the supplier holds an account, and carry no reservations or conditions.
Can I skip the checks on small purchases?
Yes, for a taxable purchase under AED 10,000, excluding VAT. This does not apply if your total purchases from that supplier exceed AED 100,000 over the past or next 12 months.
Can I pay a supplier in cash?
Payment should be electronic. Cash is only acceptable with a documented business reason, within the limits set by UAE tax rules, and where it is easy to verify.
What if a supplier shows a red flag?
Keep a clear, reasonable written explanation and provide it to the FTA on request. The explanation must be consistent with the other information you have.
What happens if I do not carry out the checks?
The FTA may refuse input VAT on purchases linked to a tax-evasion chain, treating you as someone who should have known. For penalty details, see the FTA’s penalty tables and the Tax Procedures Law.
Do I need a written policy?
Yes. It should name who carries out, reviews and supervises the checks, and set out their responsibilities. Keep it with your other tax records.
This guide is general and educational. It is not tax, legal or professional advice, and your circumstances may lead to a different outcome. Please contact us before acting on this content.
