UAE VAT October 2026: What Changes for Cash Payments and Supplier Checks?
Effective • Reviewed
Your materials arrive. The invoice is genuine. Yet the VAT you expected to claim back can still become an extra cost because of how you paid, or because the purchase is linked to tax evasion and you missed the required supplier checks.
For a business making regular purchases, that can mean thousands of dirhams coming out of its margin. Two rules taking effect on 1 October 2026 make payment decisions and supplier checks part of protecting that money.
- Cash payments: Cabinet Decision No. 149 of 2026 introduces a VAT-recovery restriction for supplies above a separately prescribed amount that are paid, or intended to be paid, in cash.
- Supplier checks: FTA Decision No. 13 of 2026 spells out how to check suppliers and purchases before claiming VAT, with an exception for qualifying small purchases.
- Keep the numbers separate: AED 10,000, AED 100,000 and AED 375,000 determine supplier checks. They are not the cash-payment limit.
Claiming back purchase VAT — called input VAT recovery — usually means deducting it in your VAT return. It does not automatically mean receiving a cash refund.
1. Cash Payments: What Has Actually Changed?
Before: This specific cash-payment restriction was not in the Executive Regulation. A cash purchase still had to meet the normal VAT-recovery requirements.
From October: New Article 54(3) blocks recovery where a supply exceeds an amount set by the Minister and you pay, or intend to pay, in cash. The separate Ministerial Decision sets the amount and the detailed conditions.
So what is the cash limit? Decision 149 does not give a dirham figure. As of this article’s review on 16 September 2026, no separate Ministerial Decision setting that figure was identified in the official sources checked.
Your finance team must confirm the applicable Ministerial Decision before treating a purchase as caught by the restriction. Neither your petty-cash policy nor the supplier-check thresholds below can supply that missing legal figure.
Source: Cabinet Decision No. 149 of 2026, new Article 54(3) and effective-date provision.
Example A: The AED 1,250 Cash Mistake
A fit-out contractor buys materials for AED 25,000 plus AED 1,250 VAT. The site manager pays the full AED 26,250 in cash.
For this example only, assume the purchase falls within the restriction once the separate Ministerial conditions are applied. AED 25,000 is the purchase value, not an announced cash limit.
- With full VAT recovery: AED 26,250 paid − AED 1,250 claimed = AED 25,000 cost.
- With recovery blocked: AED 26,250 paid − AED 0 claimed = AED 26,250 cost.
- Extra cost to the job: AED 26,250 − AED 25,000 = AED 1,250.
That AED 1,250 VAT is now dead money that comes straight out of your profit margin. This is the consequence if the restriction applies; the cash payment alone does not prove that it does.
Practical action: Make electronic payment your normal purchasing method. Where Decision 13’s checks apply, it requires electronic payment unless cash has a documented business reason, meets applicable tax thresholds and can be readily verified.
Source: FTA Decision No. 13 of 2026, Article 4(2).
2. Know Your Supplier: A Trade Licence Is Only the Start
Before: The VAT Law already provided for rejecting claims linked to tax evasion where you knew, or should have known, about the connection.
From October: Decision 13 sets out the checks, records, review cycle and spending thresholds for verifying suppliers and purchases before claiming VAT. Think of it as “know your supplier” for your purchasing team.
A licence helps establish who the supplier is. Your team also needs to check whether the business operates where it says it does and whether the deal makes commercial sense.
The Three Tiers: Which Checks Apply?
Check both the individual purchase and your total purchases from that supplier. For the cumulative tests, look back over the previous 12 months and ahead over the next 12 months, rather than using only the calendar year.
- Tier 1 — Small-purchase exception: A supply below AED 10,000, excluding VAT, can qualify for exemption from Decision 13’s checks, provided neither past nor expected supplier totals exceed AED 100,000. The usual VAT-claim requirements still apply.
- Tier 2 — Standard checks: Apply the checks to supplies of AED 10,000 or more, excluding VAT, and to smaller supplies when the supplier total exceeds, or is expected to exceed, AED 100,000.
- Tier 3 — Additional checks: Above AED 375,000 from one supplier over either 12-month period, add a bank-confirmation check and assess available reviews and media reports from reliable sources.
The boundaries matter: Exactly AED 10,000 is outside the small-purchase exception. The cumulative triggers say exceeds AED 100,000 and AED 375,000.
Source: FTA Decision No. 13 of 2026, Articles 3(4) and 6. These are supplier-verification thresholds, not cash-payment limits.
Example B: The Small Orders That Add Up
Your purchasing officer orders packaging from the same supplier, each time for AED 8,000 before VAT. Every order looks small enough for the exception.
- After 12 orders: 12 × AED 8,000 = AED 96,000.
- After 13 orders: 13 × AED 8,000 = AED 104,000.
Within a 12-month period, those purchases cross the AED 100,000 trigger. The small-purchase exception is no longer available.
Do not wait for order 13 if you already expect that spending. A forecast above AED 100,000 over the next 12 months triggers the checks too.
What Does “Check the Supplier” Mean in Practice?
Where the checks apply, build a file that answers these questions:
- Who are we buying from? Verify a company’s incorporation and obtain valid ID for its authorised representative. For an individual supplier, obtain valid ID and meet them in person or virtually before the supply.
- Does the business actually operate there? Confirm its premises electronically or through a visit, and check that they suit its activities.
- Are there warning signs? Check for more than two changes of address or key personnel in the previous 12 months, or deals out of proportion to the business. Keep clear, justified explanations consistent with the evidence.
- Does this purchase make sense? Check the commercial purpose, price, licensed activity, payment terms and any intermediary’s role. For goods, verify authenticity, origin and the supplier’s ownership or right to sell them.
For Tier 3: Obtain from the supplier a letter issued by an authorised UAE bank confirming it has a bank account, without relevant reservations or conditions. Review reliable public feedback and media coverage where available for inconsistencies or signs of tax evasion.
Verify suppliers when first dealing with them and, for repeat business, when they have not been verified in the previous 12 months. Each purchase also needs its own transaction checks.
If the purchase is connected to tax evasion, the FTA must reject the claim when you knew about that connection and may reject it when you should have known. Failing to perform the prescribed checks puts you within that “should have known” test.
An incomplete supplier file is therefore a serious issue, but it is not an automatic loss of VAT on every purchase. The connection to tax evasion remains part of the legal test.
Sources: Decision 13, Articles 3–5, and VAT Law, Article 54(bis).
Why This Matters Beyond the Finance Team
Purchasing officers choose suppliers, site managers may hand over cash, and accounts payable processes the bill. A decision made at any of those points can leave finance trying to support a claim after the money has gone.
The Ministry of Finance says the changes aim to strengthen compliance and reduce tax-evasion risks. In practical terms, checks on identity, premises, goods and payments help expose problems such as fake invoices and suppliers that exist only on paper.
Source: Ministry of Finance announcement, 8 September 2026. The examples of fraud risks explain the practical purpose of the checks.
Four Actions Your Team Can Take Before October
Give this checklist to your procurement, operations and finance leads:
- Put someone in charge of supplier checks. Write down who collects evidence, reviews it and supervises the process. Record verification dates and schedule the required repeat reviews.
- Track purchases by supplier. Monitor individual supply values, the previous 12 months’ total and the next 12 months’ forecast. Flag the AED 10,000, AED 100,000 and AED 375,000 tests.
- Agree payment methods before placing orders. Use electronic payments as the default and check the applicable Ministerial cash rules. Document the business reason for cash, third-party payments or payment to an account outside the supplier’s country of incorporation.
- Keep one complete purchase record. Link the invoice, order, delivery evidence, payment proof and supplier checks. Have finance resolve gaps before claiming VAT.
Before approving a purchase, know who you are paying, why the deal makes sense and how you will prove it.
Official Sources
Reviewed on 16 September 2026 against the published English texts. The worked cash example is conditional because Decision 149 leaves its threshold and detailed conditions to a separate Ministerial Decision.