UAE VAT Changes in 2026: Supplier Checks, Staff Expenses and What Changed on 1 October

Most of the UAE VAT changes in 2026 land in one place: the input VAT you deduct in your return. January brought amendments to the VAT law itself. On 1 October three more instruments took effect together, two FTA decisions and a Cabinet decision that rewrites parts of the VAT Executive Regulation. Together they set out the evidence you need on file before the FTA will accept a deduction.

If your accountant has started asking for supplier licences, bank letters and a written phone policy, this is why.

The UAE VAT changes of 2026 at a glance

What changed for input VAT on 1 October 2026?

From 1 October 2026 you need evidence on file that you checked your supplier, and that each supply makes commercial sense, before deducting the VAT on its invoice. VAT on free staff benefits is recoverable only in six listed cases, each backed by a contract or documented policy. A cash-payment restriction is law, but its threshold is pending.

The legal hook is Article 54 (bis) of the VAT law, in force since 1 January. It lets the FTA reject an input VAT deduction where the supply was part of a chain connected to tax evasion and you knew, or should have known from the circumstances. You are treated as someone who should have known if you did not verify the validity and integrity of the supply before deducting the VAT. The FTA’s public clarification VATP046 adds that the chain is not limited to your direct supplier.

So the verification file is your defence, and FTA Decision No. 13 of 2026 (issued 22 July, in force from 1 October) sets out what goes in it.

FTA Decision No. 13 of 2026: checking suppliers before you claim

Supplier verification, as the decision frames it, is a documented check on who the supplier is, where it operates and how risky it looks, repeated at least every 12 months, together with a check on each supply you receive. For the supplier you need:

• for an individual, a copy of a valid Emirates ID or passport and a meeting before the supply, in person or online;
• for a company, its incorporation confirmed through official databases or a copy of the certificate, with details matching its name, address and staff, plus a valid ID for the person who represents it;
• proof of a real place of business that fits the activity, checked electronically or by a site visit;
• a review of three risk indicators: more than two address changes in the last 12 months, more than two changes of key staff, or deals out of proportion to the supplier’s size and history. If one applies, you keep a written explanation for the FTA.

Where your purchases from one supplier exceeded AED 375,000 over the previous 12 months, or are expected to over the next 12, you also need a written confirmation from a UAE-authorised bank that the supplier holds an account, with no reservations attached. The letter does not have to be addressed to you. You are also expected to review public reviews and media coverage of that supplier.

Each supply then gets its own check: a genuine commercial reason, a price not far from market without explanation, goods or services within the supplier’s licensed activity, and goods the supplier owns or has the right to sell. A third party paying or collecting, or money going to an account outside the supplier’s country of incorporation, needs a reasonable commercial explanation. Payment should be electronic. Cash needs a documented commercial reason and has to stay within the limits set in tax legislation.

The decision does not mention the TRN. We still start every new supplier with the free TRN verification tool on tax.gov.ae, because a valid tax invoice has to carry the supplier’s TRN anyway.

You verify a supplier the first time you deal with them, and again on any later dealing if they have not been verified in the previous 12 months. A supplier you have used for years but never formally checked falls into the second group.

You may skip the checks on a supply worth less than AED 10,000 excluding VAT, unless your total purchases from that supplier exceeded AED 100,000 in the previous 12 months or are expected to in the next 12. A regular supplier who sends many small invoices stays in scope.

How to set up a supplier verification policy

The decision also requires a documented policy naming who carries out, reviews and supervises the checks, kept with your other tax documents. For a small company it can be two pages. A workable order:

1. List every supplier from the last 12 months with total spend per supplier, excluding VAT.
2. Mark those above AED 100,000 (no small-invoice exception) and above AED 375,000 (bank letter and public-review check).
3. Write the policy: who collects documents, who reviews, who supervises, and what happens when a check fails.
4. Open a file per supplier: licence or incorporation record, representative’s ID, address evidence, risk-indicator answers and, where needed, the bank letter. Date each check so you know when the 12 months run out.
5. Add the supply-level questions to purchase approval: commercial reason, market price, activity on the supplier’s licence, electronic payment to the supplier’s own account.
6. Keep the evidence and the policy with your VAT records. Our guide to record-keeping requirements covers how long.

Expect friction with informal suppliers: a contact on WhatsApp, an invoice from one entity and a payment request from another. Under the decision each of those details needs a written explanation, or the VAT on that invoice is exposed.

Can you still recover VAT on staff costs?

Yes, in six cases, if the benefit comes from a contract or documented policy and meets FTA Decision No. 17 of 2026: work transport, meals at remote sites, accommodation the job requires, new joiners’ housing for up to 30 days, work phones and home internet, and business parking. VAT on other free staff benefits is generally blocked.

Article 53 of the Executive Regulation blocks input VAT on goods and services given to employees free for their personal benefit, with exceptions. Cabinet Decision No. 149 of 2026 narrowed one: benefits that labour law makes mandatory still qualify, but staff accommodation counts only if MoHRE decisions or directives make it mandatory. The contract-or-policy route now works only within the cases the FTA sets, and Decision No. 17 (issued 9 September, in force from 1 October) sets them.

Watch the cash-allowance condition. If the employee could take money instead of the transport, meals or housing, the VAT on that benefit is not recoverable. Phones and parking depend on written policies, so SIM cards handed out without one give you no basis to claim. Health insurance for employees and their families sits under a separate, older exception in Article 53.

Before you file the return covering October 2026, compare your staff-benefit expense lines with the table and stop claiming VAT on anything that does not fit. Our walkthrough on filing a VAT return shows where input VAT goes on the form.

Is there now a cash limit for VAT recovery?

The rule exists, but the number does not yet. Cabinet Decision No. 149 of 2026 added Article 54(3) to the Executive Regulation: no input VAT on a supply worth more than an amount the Minister of Finance will set, where it is paid or meant to be paid in cash. No such decision had been published by 9 October 2026.

Until it is, no cash figure you see quoted has legal force. The wording refers to the value of the supply, so the treatment of part-cash payments is not yet clear. Decision 13 already expects electronic payment, so moving cash-paid suppliers to bank transfer now covers both rules.

Other changes in Cabinet Decision No. 149 of 2026

The Ministry of Finance announced the decision on 8 September 2026. It was issued on 1 September and most of it applies from 1 October.

A new composite-supply clause stops a business from splitting a bundle into separate supplies when its nature and economic substance show the parts cannot be separated; the bundle is taxed according to its principal component. The zero rate for medical products now refers to products specified in a Cabinet decision. The Capital Asset Scheme’s scope was clarified, and it still covers business assets costing AED 5 million or more excluding VAT.

Apportionment changes later. From the first VAT tax year starting after 1 October 2027, a business with both taxable and exempt supplies will base its recovery percentage on taxable supplies against total supplies, instead of comparing recoverable input VAT with total input VAT. Government entities and charities keep an input-based method. If you make exempt supplies, the difference between zero-rated and exempt already decides how much you recover, and the new formula can move that percentage, so model it before your tax year rolls over.

Changes that took effect earlier in 2026

Federal Decree-Law No. 16 of 2025 amended the VAT law from 1 January 2026, with two changes that touch everyday bookkeeping.

When you import concerned goods or services under the reverse charge, you no longer issue a tax invoice to yourself. You still account for the VAT in your return and keep the supporting documents. The relief covers imports on or after 1 January 2026.

VAT credits now expire. Under the amended Article 74(3), you have five years from the end of the tax period in which a credit arose to use it against VAT or penalties, or to apply for a refund. In the FTA’s own example, a credit from the period ending 31 January 2026 has to be used or claimed by 31 January 2031.

Federal Decree-Law No. 17 of 2025, amending the Tax Procedures law from the same date, adds a transitional window. Where the five-year period expired before 1 January 2026, or expires within one year after it, you may file a refund request within one year from 1 January 2026. That window closes at the end of this year. If an old credit is sitting on your EmaraTax account, start the VAT refund request now.

How QuickTax helps

We sort your suppliers against the AED 10,000, AED 100,000 and AED 375,000 lines, build the verification files and the written policy Decision 13 asks for, and check staff-benefit VAT against Decision 17 before it reaches your return. While the transitional window is open, we also check your EmaraTax account for old credits worth claiming.

See how our accounting and tax service works →

This material is for reference and is not tax advice. The cash-payment threshold is still to be set, so always verify current requirements on the official resources of the FTA and the UAE Ministry of Finance.

What this means for you

The 2026 VAT changes all come back to one question: can you prove the input VAT you deduct? Three things to act on now: