UAE Businesses Face VAT Refund Freeze From October 2026 if Suppliers Are Linked to Tax Evasion
New Federal Tax Authority rules mean companies can no longer take a supplier’s invoice at face value.
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Starting October 1, 2026, unpaid VAT anywhere in the supply chain could cost businesses their own refund.
UAE companies have a new incentive to scrutinize their suppliers: starting October 1, 2026, the Federal Tax Authority (FTA) gains the power to withhold VAT refunds from businesses whose purchases are tied, at any point in the supply chain, to tax evasion.
Value-added tax, the 5% levy applied to most goods and services since its 2018 introduction, has traditionally favored businesses, allowing them to reclaim what they paid on their purchases as a matter of course. That will no longer be automatic.
Under the incoming rules, a refund claim can be denied if the underlying transaction is found to connect back to evasion elsewhere in the chain, even if the business itself did nothing wrong.
The obligations businesses must meet are laid out in FTA Decision No. 13 of 2026, which spells out the due diligence steps required under Article 54 bis of the VAT Law- a clause inserted by Federal Decree-Law No. 16 of 2025. With the decision taking effect on October 1, 2026, businesses have only a short runway to get their compliance in order.
RELATED: Here’s What You Need to Know About the UAE’s New R&D Tax Incentives Program
Starting October 1, 2026, unpaid VAT anywhere in the supply chain could cost businesses their own refund.
UAE companies have a new incentive to scrutinize their suppliers: starting October 1, 2026, the Federal Tax Authority (FTA) gains the power to withhold VAT refunds from businesses whose purchases are tied, at any point in the supply chain, to tax evasion.
Value-added tax, the 5% levy applied to most goods and services since its 2018 introduction, has traditionally favored businesses, allowing them to reclaim what they paid on their purchases as a matter of course. That will no longer be automatic.
Under the incoming rules, a refund claim can be denied if the underlying transaction is found to connect back to evasion elsewhere in the chain, even if the business itself did nothing wrong.
The obligations businesses must meet are laid out in FTA Decision No. 13 of 2026, which spells out the due diligence steps required under Article 54 bis of the VAT Law- a clause inserted by Federal Decree-Law No. 16 of 2025. With the decision taking effect on October 1, 2026, businesses have only a short runway to get their compliance in order.
RELATED: Here’s What You Need to Know About the UAE’s New R&D Tax Incentives Program
