Shareholder and Intercompany Loans in UAE: Corporate Tax Rules Every SME Should Know
02/11/2026
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Imagine your business purchases goods worth AED 100,000 from a supplier. You receive an invoice, make the payment and record the input VAT in your accounts.
Everything appears correct.
But during a tax review, you are asked to prove that the supplier is genuine, the transaction actually occurred and the payment arrangements are commercially reasonable.
Can your finance team provide that evidence?
This is becoming an increasingly important question for businesses operating in the UAE.
With the introduction of FTA Decision No. 13 of 2026, supplier verification is now an important part of input VAT recovery.
The new requirements took effect on 1 October 2026 and apply to relevant verification procedures before businesses deduct input tax.
Companies must therefore look beyond receiving a tax invoice and introduce practical checks into procurement, supplier onboarding and accounting processes.
The Federal Tax Authority introduced Decision No. 13 of 2026 to establish measures for verifying the validity and integrity of suppliers and supplies.
The decision operates alongside Article 54(bis) of the UAE VAT Law, which addresses input VAT recovery where transactions form part of a tax-evasion arrangement.
The purpose is to help ensure that businesses claim input VAT on genuine commercial transactions supported by appropriate evidence.
For finance teams, this means introducing a clear procedure to answer three important questions:
Is the supplier a genuine business or individual?
Did the underlying transaction actually take place?
Can the company demonstrate that the required verification was completed?
A valid tax invoice remains essential, but it should be supported by the required supplier and transaction checks.
Supplier verification should begin when a business enters into a relationship with a new supplier.
For an existing supplier, verification is generally required again if it has not been performed during the preceding 12 months.
Depending on the supplier's legal status, the process may include reviewing:
Trade licence and incorporation details
Official registration information
Identity of the authorised representative
Actual business address
Nature of business activities
Relevant commercial information
Businesses dealing with individual suppliers must follow the identification and meeting requirements applicable under the decision.
For corporate suppliers, finance and procurement teams should also assess whether the supplier's stated business premises and activities are consistent with its commercial operations.
These checks help businesses identify unusual arrangements before accepting invoices or making payments.
Verifying the supplier does not automatically establish that every invoice is genuine.
Businesses must also assess the supplies they receive.
For example, suppose a company purchases specialised equipment from a supplier whose licensed business activity is unrelated to the equipment.
This does not automatically mean the purchase is invalid. However, it may require further explanation and supporting evidence.
Transaction verification should consider:
The commercial reason for the purchase
Whether the supplier normally provides the goods or services
Whether the invoice matches the actual supply
Whether the price is commercially reasonable
The payment method and recipient
The origin and ownership of goods, where relevant
Whether any intermediary has a legitimate business role
Purchase orders, delivery confirmations, contracts and payment records can help demonstrate that a transaction is genuine.
FTA Decision No. 13 of 2026 introduces specific thresholds that affect particular checks.
AED 375,000 supplier threshold
Where supplies from a supplier exceed, or are expected to exceed, AED 375,000 over the relevant 12-month period, additional checks apply, including prescribed bank-account and business-reputation verification.
AED 10,000 small-supply exception
Certain supplies valued below AED 10,000 excluding VAT may qualify for an exception from the decision's verification measures.
However, that exception is unavailable when supplies from the same supplier exceed, or are expected to exceed, AED 100,000 within the relevant 12-month period.
These thresholds should not be confused with the general VAT registration thresholds. They serve different purposes.
Businesses should assess the exact statutory conditions before relying on an exception.
A supplier may initially appear legitimate but develop risk indicators over time.
Examples identified in the decision include repeated changes to a supplier's address or key employees and transactions that are unusual compared with the size or history of the supplier's business.
Consider a newly established company issuing invoices for exceptionally large transactions without a clear commercial explanation.
The purchasing company should investigate the circumstances and retain evidence explaining the arrangement.
Similarly, payments routed to an unrelated third party or unusual bank account may require further verification.
The objective is not to reject every unfamiliar supplier. It is to establish whether the transaction makes commercial sense and whether supporting records are adequate.
Businesses can introduce a simple internal process covering the following stages.
Supplier onboarding
Collect the required identification, registration and business information. Record when verification was completed.
Purchase approval
Confirm the goods or services are required and the transaction has a legitimate business purpose.
Invoice review
Match supplier invoices against contracts, orders, delivery documents or service completion evidence.
Payment verification
Check that payment instructions are consistent with the supplier and transaction.
Risk review
Identify unusual circumstances and document any explanations received.
VAT claim approval
Before including the relevant input VAT in a return, confirm that the applicable checks and ordinary input tax recovery requirements have been satisfied.
Record retention
Maintain verification documents, internal approvals and supporting evidence in an organised system.
Supplier verification is no longer only a procurement or vendor-management activity.
It directly affects VAT compliance.
A business may have hundreds of suppliers, multiple invoice-processing employees and different payment approval procedures.
Without a consistent system, one department may approve suppliers using proper documentation while another accepts invoices without completing the necessary checks.
A central supplier register can reduce this inconsistency.
Useful register fields include the supplier's legal name, registration information, verification date, risk assessment, supporting-document location and next review date.
Accounting software can help organise these records, but it does not replace the required professional judgement.
Young & Right Accounting & Tax Consultancy supports UAE businesses with VAT compliance, accounting reviews, bookkeeping and tax advisory services.
Our team can assist companies in reviewing supplier records, identifying documentation gaps, reconciling purchases with VAT returns and improving accounts payable controls.
Businesses that regularly claim substantial input VAT should review their procedures against the October 2026 requirements instead of waiting for an FTA enquiry.
The UAE's updated supplier verification framework makes proper documentation and transaction checks increasingly important.
Companies should understand the applicable requirements, verify relevant suppliers, investigate unusual transactions and maintain evidence of the procedures performed.
Strong VAT compliance begins before an invoice reaches the tax return.
For professional VAT compliance and accounting support, contact Young & Right Accounting & Tax Consultancy.
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