Inhaltsverzeichnis
ToggleA valid tax invoice is no longer enough to support input VAT recovery.
Since October 1, 2026, UAE businesses must verify their suppliers, and each supply, before they deduct input VAT and claim input VAT recovery, subject to the applicable requirements and exceptions. The rule is FTA Decision No. 13 of 2026, and it makes supplier verification a more direct concern for procurement teams.
The change started with Federal Decree-Law No. 16 of 2025, which added Article 54 (bis) to the UAE VAT Law from January 1, 2026. The article lets the Federal Tax Authority (FTA) deny input VAT recovery unless certain conditions are met. Where the business knew of a connection to any tax evasion, the FTA must reject the deduction. Where the business should have known, the FTA may reject it.
Decision No. 13 sets out the verification measures that decide the “should have known” test. A business that has not carried out those measures can be deemed to have been required to know of the connection. Documented verification is therefore an important part of managing VAT risk.
The Ambition Is Ready. The Data Is Not.
Agentic AI is moving from slide decks into software roadmaps. In August 2025, Gartner predicted that 40% of enterprise applications would be integrated with task-specific AI agents by the end of 2026, up from less than 5% at the time.
Procurement is not exempt. But Gartner has also been direct about readiness. In August 2026, Gartner analyst Lynne Phelan wrote that Gartner predicts that through 2027, only 20% of procurement organizations will have sufficient data and process maturity to use multiagent systems.
Separately, Gartner predicts that over 40% of agentic AI projects will be canceled by the end of 2027, due to escalating costs, unclear business value, or inadequate risk controls.
Put those together and a pattern emerges. The ambition is arriving faster than foundations.
So what actually goes wrong when an agent acts on data that is not ready?
Two levels of checks
The Decision works at two levels: the supplier and the supply.
Supplier verification applies the first time you deal with a supplier, and again if the supplier has not been verified in the previous 12 months.
For a company, you must:
- Verify incorporation through official databases or the certificate of incorporation
- Verify the identity of the person authorized to represent the supplier
- Confirm the supplier has a real place of business that matches its activities, electronically or through a field visit
For an individual supplier, you must obtain a valid proof of identity, such as an Emirates ID or passport, and meet the supplier, in person or virtually, before the supply is made.
For every supplier, assess risk indicators, such as changes of address or key staff more than twice in 12 months, or transactions out of proportion to the supplier’s size and history, and keep a justified explanation for any flag. A supplier scorecard can help teams track these signals over time.
Supply verification applies to each taxable supply you receive. Before claiming input VAT recovery, you must check:
- The commercial rationale for the transaction and the supplier’s role in it
- The payment method and conditions: payment should be made electronically, cash payments need a documented commercial reason and must meet the conditions in the Decision, and third-party payments or payments to bank accounts outside the supplier’s country of incorporation need a reasonable commercial explanation
- Whether the price is reasonable against market rates
- Whether the goods or services fall within the supplier’s licensed and ordinary business activities
- The ownership and origin of the goods
- Where the supplier acts as an intermediary, whether its role has a justifiable commercial explanation
Thresholds that matter:
Threshold | What it means |
| Under AED 10,000 per supply (excluding VAT) | Checks may be disregarded, subject to the conditions in the Decision. The exception does not apply where the total value of supplies from the supplier exceeds AED 100,000 over the previous 12 months, or is expected to exceed that amount over the next 12 months |
AED 100,000 from one supplier | Where supplies exceed, or are expected to exceed, this amount over the relevant 12-month period, the small-value exception no longer applies |
AED 375,000 from one supplier | Where supplies exceed, or are expected to exceed, this amount over the relevant 12-month period, obtain written confirmation from a bank authorized in the UAE that the supplier holds an account there. Review customer recommendations where available, as well as reliable public reviews and media coverage about the supplier |
The “expected to exceed” test matters at onboarding. A new contract can trigger higher checks before any money is spent.
Finally, you must keep a written policy that names who performs, reviews and supervises these checks, and retains the evidence for the FTA.
Why this lands on procurement
Supplier verification happens where suppliers are onboarded and approved. That is procurement’s territory, even though the input VAT sits with finance.
The practical questions follow quickly. What happens when a supplier’s trade license expires between onboarding and a later purchase? Who holds the evidence when procurement approves the supplier but accounts payable processes the invoice? Without one system of records, documents sit in email, risk notes in spreadsheets and approvals in inboxes, and the evidence is hard to produce when the FTA asks.
How MeRLIN Know Your Supplier (KYS) helps
MeRLIN KYS, part of MeRLIN Supplier Relationship Management (SRM), supports the supplier-level checks and keeps the evidence in one place.
What the Decision requires | How MeRLIN KYS supports it |
Assess actual and expected spend with each supplier | Prequalification questionnaires before onboarding, which can capture expected spend |
Verify supplier incorporation and representative identity | AI-powered scanning and validation of supplier-uploaded documents, such as trade licenses, incorporation certificates and representative IDs, to support your team’s review |
Collect the right documents from every supplier | Configurable mandatory document rules for different supplier categories |
Re-verify suppliers every 12 months | Annual re-verification with automated reminders and document expiry alerts |
Assess risk and justify every flag | A risk register that records the reason behind every risk decision, and a Compliance Manager to create and track risks |
Track changes of address and key staff | Controlled supplier profile editing with approval workflows, so every change is recorded |
Review reputation and risk signals | Supplier data from D&B, Prewave and Creditreform, through customer-owned accounts |
Confirm pricing is reasonable against the market | RFx comparison using weighted parameters, with the evaluation kept as evidence |
Keep evidence of every check | Buyer-led approval workflows, and fully traceable and auditable records |
KYS supports the verification process across the supplier lifecycle. It does not replace the judgment of your team, and it does not on its own guarantee eligibility for input VAT recovery.
Supply-level checks are different. Each taxable supply needs its own review, and evidence on payment method and commercial rationale often sits in your ERP or accounts payable process. Teams that already run procurement audits can fold these checks into the same review cycle. Your tax advisor should confirm your full obligations under the Decision, including how the verification requirements affect your entitlement to input VAT recovery.
Why this lands on procurement
- Identify suppliers that have not been verified in the last 12 months.
- Identify suppliers whose actual or expected supplies cross the AED 100,000 threshold, and those approaching AED 375,000, so the appropriate verification measures can be applied.
- Write or update your verification policy, naming who performs, reviews and supervises checks.
- Agree who in procurement and finance owns each piece of evidence.
MeRLIN KYS integrates with Epicor, SAP ECC, S/4HANA and other ERP systems through RESTful APIs. E-invoicing is handled at the ERP level, and MeRLIN supports e-invoicing integration with your ERP. Fixed-scope deployment can go live in two weeks.
See how MeRLIN KYS keeps supplier checks, risk decisions and evidence in one workflow.