The Checklist Has Arrived: FTA Decision No. 13 of 2026 and the New UAE VAT Due-Diligence Regime

In our earlier article, “From ‘I Didn’t Know’ to ‘You Should Have Known’: UAE Article 54(bis) and Supply-Chain VAT Risk”,¹ we analysed the significant change introduced into the VAT Law from 1 January 2026.

Article 54(bis) allows the Federal Tax Authority (FTA) to deny input VAT recovery where the supply concerned is part of a supply or chain of supplies related to Tax Evasion and the taxable person either was aware, or should have been aware, of that connection. Its Clause 3 provides that the taxable person is considered to have been required to be aware of that connection if it did not verify the validity and integrity of the supplies before deducting Input Tax, in accordance with measures, procedures and conditions to be determined by the FTA. The central uncertainty at the time of our earlier article was therefore straightforward: what exactly would the FTA require taxpayers to do?

We now have the answer. FTA Decision No. 13 of 2026 on the Measures, Procedures and Conditions required by Taxable Persons for the Verification of the Validity and Integrity of the Supplies before Deduction of Input Tax was issued on 22 July 2026 and takes effect from 1 October 2026.

The Decision largely confirms the direction anticipated in our previous analysis, but makes the regime considerably more concrete. What previously appeared to be a general due-diligence concept has now become a detailed supplier- and transaction-level compliance framework.

At the same time, the Decision raises several important interpretative questions. Most importantly, the prescribed verification procedure is an element of the deeming rule concerning the taxpayer’s knowledge. It does not itself establish Tax Evasion. This distinction is fundamental to understanding both the scope of the new obligations and the consequences of non-compliance.

What Decision No. 13 actually does

Decision No. 13 does not replace the legal test in Article 54(bis). It implements one particular part of that test.

The structure of Article 54(bis) remains:

where the FTA establishes that the supply was part of a supply or chain related to Tax Evasion and the taxable person was aware of that connection, the deduction must be rejected;

where the taxable person should, based on the circumstances, have been aware, the FTA may reject the deduction; and

for the purposes of determining whether the taxpayer was required to be aware, failure to perform the FTA-prescribed verification engages the deeming mechanism.

Article 2 of Decision No. 13 expressly confirms this relationship. Its provisions apply “for the purposes of applying the provisions of Article 54(bis)” and concern the verification of the validity and integrity of supplies received before deduction of Input Tax. This has an important legal consequence. The Decision regulates what the recipient is expected to verify and, ultimately, what it should be treated as having known. It does not replace the separate requirement that there must actually be Tax Evasion to which the relevant supply or supply chain is related.

Accordingly, even full non-compliance with Decision No. 13 should not, by itself, trigger rejection of Input Tax recovery. The deeming rule becomes relevant only if the FTA first establishes that the relevant supply, or a supply in the relevant chain, was in fact related to Tax Evasion. If the supplier properly accounted for and paid the VAT, there would ordinarily be no underlying Tax Evasion to which the recipient could be deemed to have been required to be aware. Equally, the mere fact that a supplier failed to pay VAT should not necessarily be sufficient: non-payment caused by error, financial distress or other circumstances that do not involve the use of illegal means falling within the statutory definition of Tax Evasion should not, in itself, activate Article 54(bis). In such cases, however serious the recipient’s failure to comply with the verification procedures may be, there is no underlying Tax Evasion to which the deemed knowledge can attach.

The verification rules are part of the deeming mechanism. They do not create Tax Evasion.

The definition of Tax Evasion in Decision No. 13 is not new. It reproduces the definition already contained in Article 1 of the VAT Law: the use by a person of illegal means resulting in a reduction of Due Tax, its non-payment, or a refund of Tax to which the person was not entitled. The general definition under Tax Procedures Law is substantively the same, subject to additional wording identifying the legal source of the absent entitlement to the refund. Article 51 of Tax Procedures Law also expressly provides that, while the burden of proving the accuracy of a Tax Return rests on the taxpayer, the burden of proof in cases of Tax Evasion rests on the FTA.

The material change made by Decision No. 13 is therefore not an expansion of the meaning of Tax Evasion. It is the creation of a mechanism for determining whether the recipient should have been aware that the relevant supply or chain was connected with Tax Evasion.

Three propositions should therefore be distinguished:

failure to complete one or more prescribed verification procedures does not itself constitute Tax Evasion;

the presence of a supplier or transaction risk indicator identified in Decision No. 13 does not itself establish Tax Evasion; and

even if the taxpayer failed to comply with the Decision, the FTA should still have to establish that the relevant supply or supply chain was actually related to conduct meeting the statutory definition of Tax Evasion.

The structure of Article 3 supports this interpretation. Where one of the specified supplier risk indicators exists, the Decision does not automatically prohibit the transaction or deem the supplier fraudulent. Instead, Article 3(3)(b) permits a taxpayer to retain a clear and justified explanation for the relevant circumstances, provided that explanation is consistent with the evidence available.

Accordingly, Decision No. 13 should not operate as a free-standing ground for denial of input VAT. Its legal effect under Article 54(bis)(3) is contingent: failure to perform the checks becomes material to the deeming rule only where there is something of which the taxpayer could have been required to be aware – namely, Tax Evasion connected with the relevant supply or chain.

This does not mean that taxpayers can simply regard the procedures as optional whenever they personally believe a supplier to be trustworthy. The Decision itself uses mandatory language and, as discussed below, requires verification and documentation. There is also a difference between being confident that the immediate supplier is compliant and being able to exclude Tax Evasion elsewhere in a wider chain.

The stronger legal proposition is therefore narrower: failure to comply with the verification requirements cannot substitute for proof of the underlying Tax Evasion. The burden of proof here remains with the FTA under Article 51 of Tax Procedures Law.

Supplier verification is now prescribed in considerable detail

Identity

Where the supplier is a natural person, the taxpayer must obtain valid identification and meet that supplier, physically or virtually, before the supply is made.² Where the supplier is a legal person, the taxpayer must verify its incorporation through official databases or obtain its certificate of incorporation. The incorporation details must correspond with the entity’s name, address, employees and other related information.³ The identity of the director, agent or employee authorized to represent the supplier must also be verified.⁴

This goes materially beyond merely checking the supplier’s TRN and collecting a trade licence.

Actual place of business

The taxpayer must verify the existence of an actual place of business of the supplier, either through appropriate electronic means or by conducting a field visit,⁵ and must ensure that the place of business is compatible with the supplier’s activities.⁶ The Decision therefore does not necessarily require an on-site visit in every case. Electronic verification may suffice. But the second limb is substantive: the taxpayer is expected to consider whether the premises make commercial sense for the business supposedly being conducted there.

Specific supplier risk indicators

The Decision identifies three express risk indicators:⁷

more than two changes of address during the preceding 12 months;

more than two changes of key personnel during that period; and

transactions disproportionate or unexpected in volume, value or nature compared with the size of the supplier’s business and its trading history.

The importance of these indicators should not be overstated. Their presence is not itself a finding of Tax Evasion. The taxpayer may proceed where there is a clear and justified explanation that is not contradicted by the evidence or information available to it.

This introduces an important theme running throughout the Decision: unusual circumstances are not necessarily unacceptable, but they require a commercially credible explanation.

Enhanced verification above AED 375,000.

Where the value of supplies received from a supplier exceeds AED 375,000 during the preceding 12 months, or is expected to exceed that amount over the following 12 months, further requirements apply: _⁸

The taxpayer must obtain confirmation from an authorized bank in the UAE that the supplier maintains a bank account.

It must also review and assess publicly available reviews and media coverage from reliable sources and consider whether they are consistent with the nature and scale of the supplier’s business and whether they reveal indicators of suspected Tax Evasion.

Importantly, the threshold is both backward- and forward-looking. Taxpayers cannot simply wait until AED 375,000 has actually been crossed if, based on anticipated dealings, it is already expected to be exceeded.

This is not merely supplier KYC: the individual transaction must make commercial sense

Perhaps the most important feature of Decision No. 13 is that the verification exercise does not end when the supplier is onboarded. Article 4 requires verification of the supply itself. The taxpayer must conduct a general assessment of the transaction and ensure that the supplier’s participation is supported by genuine commercial reasons.

Payment arrangements must also be commercially justifiable. Where a third party is involved in paying or receiving the consideration, or payment is made to a bank account outside the supplier’s country of incorporation, there must be a reasonable commercial explanation consistent with the evidence available to the taxpayer. Electronic payment is the default; cash requires a documented commercial rationale, compliance with applicable statutory thresholds and easy verifiability.⁹

The taxpayer must further verify that:¹⁰

prices or profit margins are not commercially unjustifiable or materially different from market conditions without a clear reason;

the goods or services supplied are within the supplier’s ordinary activities or licensed activities;

in the case of goods, their authenticity and origin and the supplier’s ownership or right to dispose of them can be verified; and

where an intermediary is involved, there is a clear and justifiable commercial explanation for its role.

This is significantly more than a documentation exercise. The Decision expects the recipient to understand:

why the transaction exists,

why this supplier is involved,

why the price makes sense,

why the payment is routed in the chosen way and,

where an intermediary is used, what economic purpose that intermediary performs.

Collecting documents is not enough

In our earlier study, we cautioned against treating due diligence primarily as an exercise in accumulating documentation. The mere ability to produce evidence of due diligence can always be met by the argument that the taxpayer “did not do enough”. Good records may materially improve the taxpayer’s position once a dispute exists, but the more effective solution is a control system designed to prevent the business from entering a problematic supply chain in the first place.

Decision No. 13 reinforces this conclusion. The FTA does not merely require incorporation certificates, identification documents and bank confirmations. It expressly requires consideration of commercial substance: pricing, margins, business capacity, payment routes, provenance of goods and the function of intermediaries.

This also reinforces the procurement point developed in the earlier article. We argued that if procurement is systematically rewarded for obtaining the lowest possible price without testing whether that price leaves economic room for the supplier and the wider chain to operate compliantly, additional documentation cannot cure the underlying problem. Decision No. 13 now expressly requires verification that prices and profit margins are not commercially unjustifiable or significantly different from market conditions without a clear reason.

The rational response is therefore not simply to add documents to the procurement file. It is to ensure that procurement itself is designed to identify and reject commercially inexplicable transactions.

The procedure and governance are mandatory too

Article 5 adds an organizational layer to the substantive checks. The taxpayer must verify the supplier when dealing with it for the first time and repeat that supplier-level verification where the supplier has not been verified during the preceding 12 months.¹¹ More significantly, the taxpayer must verify each Taxable Supply received or accepted under Article 4. ¹²

It must document the verification steps and retain supporting documents and records enabling the FTA to test whether the procedure was correctly implemented.¹³ Finally, it must “maintain a documented policy identifying the persons in charge of implementing, reviewing and supervising the verification procedures, as well as indicating their powers and responsibilities in a clear manner and form. Such policy shall be retained at the designated location for keeping the required document”.

Two distinctions are therefore important:

supplier verification is generally performed on onboarding and at least every 12 months thereafter; whereas

transaction verification is required for each Taxable Supply, subject to the exceptions discussed below.

Our earlier recommendation that taxpayers create a formal VAT-fraud risk policy and assign responsibility for high-risk counterparties has therefore moved from conservative good practice to something much closer to an express compliance requirement. For businesses with substantial transaction volumes, these procedures cannot realistically be administered solely through manual emails or tax-team review. They will need to be embedded into procurement, supplier-master data, Accounts Payable and transaction-approval workflows.

Two sets of thresholds need to be monitored

Article 6 provides limited de minimis relief. A taxpayer may disregard the prescribed measures and conditions for an individual Taxable Supply where the consideration, excluding VAT, is below AED 10,000. However, this exception does not apply where the aggregate supplies received from the same supplier exceed AED 100,000 during the preceding 12 months, or are expected to exceed AED 100,000 during the following 12 months. This operates alongside the separate AED 375,000 threshold for the enhanced supplier verification requirements.

Businesses therefore need systems capable of monitoring:

individual supplies against AED 10,000;

aggregate supplies from each supplier against the AED 100,000 rolling threshold; and

aggregate supplies against the separate AED 375,000 threshold for enhanced checks.

Manual monitoring of these rolling limits is likely to be unreliable for businesses with significant transaction volumes.

Compliance with the checklist should not become strict liability

The relationship between Decision No. 13 and Article 54(bis) will probably become one of the most important points in future disputes. Suppose a taxpayer fails to obtain a prescribed bank confirmation, misses an annual supplier re-verification or cannot demonstrate one element of its transaction review. Clause 3 may affect whether that taxpayer is deemed to have been required to be aware of Tax Evasion. But it does not say that failure to perform the check causes Tax Evasion itself to be deemed to exist.

Accordingly, if the underlying supplies are genuine and there was no Tax Evasion anywhere in the relevant chain, non-compliance with one verification step should not, in our view, permit input VAT to be denied under Article 54(bis) merely because that procedural omission occurred.

The architecture of the provisions therefore continues to require two separate questions:

Was the supply or chain actually related to Tax Evasion?

What did the recipient know, or what should it be treated as having been required to know?

Collapsing these two questions would transform the Decision from a deeming mechanism concerning knowledge into a free-standing strict-liability restriction on input tax. That is not what Article 54(bis) says.

Conversely, compliance is not an express safe harbor

Taxpayers should not draw the opposite conclusion either. Decision No. 13 does not state that completing every Article 3-5 procedure conclusively prevents the FTA from establishing actual or constructive awareness. For example, a taxpayer may hold a complete supplier file while its management possesses other information showing that the transaction is artificial or connected with Tax Evasion. Compliance with the prescribed procedures could hardly neutralize actual knowledge under Clause 1.

Similarly, other circumstances not specifically appearing in the Decision may arguably support the conclusion under Clause 2 that the taxpayer should have been aware. Decision No. 13 should therefore be viewed as a mandatory procedural baseline, rather than a statutory safe harbor.

That is another reason why the objective of the process should not be simply to create a file that looks complete in an audit. The more effective system is one that genuinely identifies circumstances in which the business should not proceed with the transaction at all.

International practice: the UAE has indeed gone beyond Kittel

Our earlier comparison with the EU and UK remains relevant, but Decision No. 13 makes the distinction considerably clearer. The EU Kittel doctrine permits deduction to be denied where the taxpayer knew or should have known that its transaction was connected with VAT fraud. UK practice subsequently developed detailed concepts around corporate attribution of knowledge, the “only reasonable explanation”, general awareness and contrivance.

However, the subsequent CJEU decisions in Mahagében and Dávid place an important limit on that doctrine. EU law does not generally permit the tax authority to shift its own investigative function to ordinary taxable persons by making systematic investigation of suppliers a strict precondition to input-tax deduction. Our earlier study therefore concluded that, although due diligence may be relevant evidence of what a trader knew or should have known, the European model does not turn a prescribed checklist into an independent statutory precondition.

Decision No. 13 confirms that the UAE has chosen a materially more prescriptive model. UAE law now expressly requires taxpayers to test identity, premises, personnel changes, transaction scale, banking, public information, commercial rationale, payment structures, market pricing, goods provenance and intermediaries, and to document the process. The European case law remains highly relevant to interpreting actual and constructive knowledge under Clauses 1 and 2. But UAE due diligence itself is no longer merely analogous to Kittel practice. It now has its own detailed statutory framework.

The GCC comparison also remains relevant

Nothing in Decision No. 13 changes our earlier regional conclusion. The UAE remains unusual among GCC VAT jurisdictions in expressly linking input-tax deduction to the recipient’s actual or constructive knowledge of Tax Evasion elsewhere in the supply chain and, now, imposing detailed verification measures as part of that mechanism. Our earlier comparison with Saudi Arabia, Bahrain, Oman and the GCC VAT Framework therefore remains relevant. If anything, Decision No. 13 increases the divergence. The UAE no longer merely has a statutory “knew or should have known” rule. It now has an operational framework defining what the recipient must examine before claiming input VAT.

Temporal application: there are now two relevant dates

Our earlier article analyzed temporal application by reference to the effective date of Article 54(bis): 1 January 2026. Decision No. 13 creates a second date: 1 October 2026. These dates should not be conflated.

Periods before 1 January 2026

Our earlier conclusion remains unchanged. Article 54(bis) was not yet in force. In our view, input VAT arising under the earlier law should not be denied merely because a taxpayer did not perform verification steps that were neither required nor known at the relevant time. Historic transactions may of course still be scrutinized under the anti-evasion rules that existed at the time. But that is different from retrospectively applying Article 54(bis) or Decision No. 13.

Tax periods straddling 1 January 2026.

The amendment itself does not expressly resolve tax periods beginning before and ending after 1 January 2026. Different interpretations remain possible. As discussed in our earlier article, there is an argument based on analogy of law that the approach adopted elsewhere in UAE tax legislation (where amendments expressly apply to tax periods commencing on or after a specified date) can be extended by analogy to this situation. On that approach, a tax period that had already begun before 1 January 2026 should remain governed in its entirety by the previous rules.

The alternative view is that the relevant point is when the right to deduct arises or is exercised. The issue has not been expressly clarified, and the new Decision does not resolve it.

January to 30 September 2026.

Article 54(bis) is already effective during this period, but Decision No. 13 is not. The FTA can therefore rely on Clauses 1 and 2 on actual knowledge and constructive awareness based on the circumstances. However, it would be difficult, in our view, to invoke Clause 3 by criticizing a taxpayer for failure to perform specific procedures under Decision No. 13 before those procedures became effective. In particular, some procedures relate to actions that must occur at a particular historic point. A taxpayer cannot be criticized in October for failing to perform in February an act that was first prescribed in a Decision effective only from October.

Supplies made before 1 October but deducted afterwards.

This is more difficult. Article 2 frames the Decision as verification performed before deduction of Input Tax, which may support an argument that a deduction made after 1 October is subject to the new procedures even if the commercial supply occurred earlier.

Against this, several requirements cannot be satisfied retrospectively. For example, a natural-person supplier must be met physically or virtually before making the supply. If the supply occurred in September, it is impossible in October to perform that requirement in the manner prescribed.

Applying such a condition to an already completed transaction would effectively make historic conduct non-compliant by reference to a requirement that did not yet exist. In our view, there is therefore a strong argument that Decision No. 13 cannot be applied in a manner requiring taxpayers to perform retrospectively acts which, by their nature, had to be undertaken before its effective date. Further FTA clarification would nevertheless be welcome.

Rolling 12-month thresholds: pre-1 October supplies should still matter

The temporal analysis is different for purposes of the rolling thresholds. The AED 375,000 enhanced-verification threshold looks at supplies received over the previous 12 months or expected over the next 12 months. The AED 100,000 limitation on the small-supply exception uses the same backward- and forward-looking approach.

In our view, supplies made before 1 October 2026 should nevertheless be included when calculating these thresholds after the Decision has become effective. For example, when applying the AED 375,000 test on 1 October 2026, the taxpayer may need to take into account supplies received from that supplier since 1 October 2025.

This should not amount to retrospective application of the Decision. There is an important distinction between:

using historic transactions as factual data in calculating a current rolling threshold, and

retroactively requiring those historic transactions themselves to have complied with verification requirements that were not yet effective.

The former is expressly contemplated by the wording “previous 12 months”. The latter is not.

Consequently, a taxpayer may already be above the relevant threshold on the first day the Decision becomes effective. If supplies from a supplier during the preceding 12 months already exceed AED 375,000, the enhanced checks should in principle apply from 1 October. Likewise, if aggregate supplies already exceed AED 100,000, a new post-1 October supply below AED 10,000 should not benefit from the de minimis exception merely because most of the historic turnover occurred before the effective date.

Imports and RCM

Decision No. 13 does not expressly explain how the supplier-verification requirements interact with imports subject to the reverse-charge mechanism (RCM). This issue requires particular care.

On the one hand, the Decision defines Input Tax broadly to include tax paid or due where a person conducts an Import.

On the other hand, Article 48(1) of VAT Law contains a specific legal fiction: “If the Taxable Person imports Concerned Goods or Concerned Services for the purposes of his Business, then he shall be treated as making a Taxable Supply to himself, and shall be responsible for accounting for the Due Tax on that Supply and complying with all other Tax obligations arising, with the exception of issuing a Tax Invoice to himself”.

In our view, this deeming provision provides a strong basis for distinguishing RCM imports from ordinary domestic purchases for purposes of Decision No. 13. For the UAE taxable supply created by Article 48(1), the taxpayer is effectively both the deemed supplier and the recipient. The foreign commercial counterparty is the actual supplier of the underlying goods or services, but Article 48 replaces that relationship, for the relevant UAE VAT accounting, with a deemed taxable supply by the taxpayer to itself.

If that fiction is followed through consistently, the “supplier” of the relevant UAE taxable supply for RCM purposes should be the taxpayer itself. It would then be conceptually difficult to apply Article 3 of Decision No. 13 as though the foreign commercial counterparty were itself making the UAE taxable supply that generates the RCM output and corresponding input VAT.

The practical requirements of the Decision support this interpretation. They include, for example, verification of the supplier’s incorporation, place of business and licensed activity, and, above the AED 375,000 threshold, obtaining bank confirmation from an authorised bank in the State. Several of these requirements appear designed primarily for suppliers sitting within the ordinary UAE VAT chain.

The economic mechanics point in the same direction. For an ordinary RCM import, there is no UAE VAT paid to the foreign supplier which the supplier may subsequently fail to remit. In the case of imported goods under the applicable deferred mechanism, import VAT is accounted for through the registered importer’s VAT return. For imported services, the recipient accounts for output VAT under RCM and, where the normal recovery conditions are satisfied, claims the corresponding amount as input VAT. For a fully taxable business, those entries ordinarily offset each other. The classic missing-trader risk underlying Kittel-style rules – one participant collecting VAT while another participant claims it and the tax is never remitted – is therefore generally absent.

Our interpretation is consequently that the Article 48 deeming rule should be applied when identifying the relevant supplier for Decision No. 13: for the RCM taxable supply, the taxpayer is treated as supplying to itself.

This does not make the underlying foreign transaction irrelevant. The FTA may still examine whether the imported goods or services genuinely exist, whether they are used for recoverable purposes, whether their value and VAT treatment are correct, and whether the taxpayer itself has engaged in Tax Evasion. But that is conceptually different from imposing the full supplier due-diligence regime on the foreign commercial counterparty notwithstanding the VAT Law’s express fiction that the taxpayer makes the relevant taxable supply to itself. Further FTA clarification would nevertheless be useful because Decision No. 13 does not expressly address this interaction.

What businesses should do before 1 October 2026

Decision No. 13 should not be implemented as another spreadsheet maintained solely by the tax team. It needs to become part of the procurement and transaction-approval process. At a minimum, businesses should now:

map the Article 3 supplier checks into onboarding and periodic supplier review;

establish a 12-month re-verification cycle;

map the Article 4 transaction checks into procurement and Accounts Payable approval;

configure systems to monitor the AED 10,000, AED 100,000 and AED 375,000 tests on a rolling basis;

identify which suppliers are already above the relevant thresholds based on the 12 months preceding 1 October 2026;

introduce procedures for documenting the commercial explanation where a prescribed risk indicator is present;

designate persons responsible for implementation, review and supervision and formalise their authority in a documented policy;

introduce escalation procedures for unusual pricing, third-party payments, offshore payment accounts and intermediaries; and

review procurement KPIs so that an unexplained below-market price is treated as a risk indicator rather than automatically as procurement success.

The objective should not be merely to demonstrate later that a checklist was completed. A checklist can always be challenged with the proposition that more should have been done. Good contemporaneous documentation may materially strengthen a taxpayer’s defense once a dispute arises, but a mechanism genuinely designed to identify and prevent problematic transactions is considerably more likely to prevent the dispute from arising in the first place.

Procurement reality remains at the centre of the issue

Our earlier article argued that many businesses instinctively respond to VAT-fraud exposure by collecting more documents from suppliers: certificates, confirmations, questionnaires and contractual warranties. Decision No. 13 confirms that documentation matters. But it simultaneously demonstrates why documentation alone is insufficient. The Decision requires taxpayers to consider the economic reality of the transaction.

If a procurement model consistently rewards the lowest price while ignoring whether the supplier has the capacity, margin and commercial structure to supply on a compliant basis, a pristine supplier file may not solve the underlying problem. In particular, the express requirement to examine whether pricing and margins are commercially justifiable puts procurement economics directly into the VAT-risk analysis. Where a price appears “too good to be true”, the correct response is not simply to obtain another certificate. It is to understand why the price is possible.

Likewise, contractual indemnities remain useful but secondary. A clause requiring a supplier to compensate the buyer if input VAT is denied may improve the buyer’s contractual position, but it does not preserve the statutory deduction and may be commercially worthless if the supplier disappears or becomes insolvent.

Article 54(bis) and Decision No. 13 therefore require VAT risk to be addressed when suppliers and transactions are selected and structured, not merely through documents collected to support the position afterwards. Price, supplier capacity, payment terms and the commercial logic of the transaction may be as important as the formal due-diligence file.

Conclusion

When Article 54(bis) took effect, the direction of travel was clear but the operational standard was unknown. Decision No. 13 now fills much of that gap. It confirms that the UAE has chosen a substantially more prescriptive model than the EU Kittel doctrine. Due diligence is no longer merely an evidentiary factor relevant to what the taxpayer should have known. It is now governed by an express set of supplier-level, transaction-level and organizational measures.

At the same time, several boundaries of the regime are important.

First, Decision No. 13 regulates the taxpayer’s deemed knowledge. It does not itself create Tax Evasion. Failure to comply with a verification requirement should therefore not eliminate the FTA’s need to establish that the relevant supply or supply chain was actually related to Tax Evasion.

Secondly, compliance with the prescribed procedures is not expressed to be a safe harbor. A completed checklist cannot override actual knowledge or other facts demonstrating constructive awareness.

Thirdly, the Decision should not be applied retrospectively so as to require taxpayers to have performed, before 1 October 2026, acts which were not then prescribed and which cannot subsequently be performed.

Fourthly, the use of transactions predating 1 October for purposes of the Decision’s rolling 12-month thresholds is a different matter. Those earlier transactions can, in our view, properly form part of the factual look-back used to determine an obligation arising after the effective date.

Finally, the interaction with Article 48 requires separate treatment. Where RCM applies to an import of Concerned Goods or Concerned Services, the VAT Law treats the taxable person as making the taxable supply to itself. In our view, that legal fiction provides a strong basis for treating the taxpayer itself, rather than the foreign commercial counterparty, as the relevant supplier for the supplier-verification element of Decision No. 13.

The core recommendation from our earlier article therefore remains unchanged, but it is now more concrete: Documents matter, but prevention matters more. From 1 October 2026, businesses know in considerable detail what the FTA expects them to verify. The strongest compliance framework will be the one designed not merely to produce evidence for a future audit, but to prevent the business from entering a tax-evasion-linked supply chain in the first place.

Disclaimer

Pursuant to the MoF’s press-release issued on 19 May 2023 “a number of posts circulating on social media and other platforms that are issued by private parties, contain inaccurate and unreliable interpretations and analyses of Corporate Tax”.

The Ministry issued a reminder that official sources of information on Federal Taxes in the UAE are the MoF and FTA only. Therefore, analyses that are not based on official publications by the MoF and FTA, or have not been commissioned by them, are unreliable and may contain misleading interpretations of the law. See the full press release here.

The same reservation applies to the judicial issues addressed in this article. This study has not been commissioned, authorised, or endorsed by the Ministry of Justice, the Federal Supreme Court, or any other judicial authority in the UAE. It is not intended to convey, and should not be understood as conveying, any official position of those authorities. Nor does it purport to suggest that the interpretations, conclusions, or proposals set out in it are binding on the courts or must necessarily be adopted in judicial practice.

You should factor this in when dealing with this article as well. It is not commissioned by the MoF or FTA. The interpretation, conclusions, proposals, surmises, guesswork, etc., it comprises have the status of the author’s opinion only. Furthermore, it is not legal or tax advice. Like any human job, it may contain inaccuracies and mistakes that I have tried my best to avoid. If you find any inaccuracies or errors, please let me know so that I can make corrections.

¹https://willow.law/articles-post/from-i-didnt-know-to-you-should-have-known-uae-article-54bis-and-supply-chain-vat-risk/

² Decision No. 13 of 2026, Article 3(1)(a).

³ Ibid, Article 3(1)(b)(1).

⁴ Ibid, Article 3(1)(b)(2).

⁵ Ibid, Article 3(2)(a).

⁶ Ibid, Article 3(2)(b).

⁷ Ibid, Article 3(3)(a).

⁸ Ibid, Article 3(4).

⁹ Ibid, Article 4(2).

¹⁰ Ibid, Article 4(3).

¹¹ Ibid, Article 5(1).

¹² Ibid, Article 5(2).

¹³ Ibid, Article 5(3).