Article 54 bis and input VAT recovery in the UAE

What Article 54 bis is

Article 54(bis) was added to the UAE VAT Law — Federal Decree-Law No. 8 of 2017 — by Federal Decree-Law No. 16 of 2025. According to the Ministry of Finance, the amendments entered into force on 1 January 2026 and authorise the Federal Tax Authority to deny the deduction of input tax if it determines that the supply forms part of a tax-evasion arrangement.

FTA Decision No. 13 of 2026 defines Tax Evasion as a person's use of illegal means resulting in the reduction of the tax due, its non-payment, or a refund the person was not entitled to.

Knew, or should have known

Professional commentary describes Article 54(bis) as working on a knowledge test: input tax is refused where the business knew the supply was connected to tax evasion, and may be refused where it should have known from the circumstances. Commentators also point out that failing to verify the validity and integrity of a supply before deducting input tax can count against a business on the “should have known” question.

How Decision No. 13 fits in

Decision No. 13 of 2026 is issued “for the purposes of applying the provisions of Article 54(bis)” (Article 2). It sets out the measures a business takes to verify the supplier (Article 3) and each supply (Article 4), when to do it and how to document it (Article 5), and when low-value supplies may be disregarded (Article 6). It applies from 1 October 2026. Our article-by-article explanation covers each step.

Why a tax invoice is not enough

A correct tax invoice remains necessary, but it does not show who stands behind it. Article 54(bis) and the decision look at the substance: whether the supplier is a real business at a real address, whether the purchase makes commercial sense, and whether payment followed a transparent route — electronic, to the supplier, in the supplier's country of incorporation — or has a documented explanation where it did not.

What to document

• For each supplier: identity and incorporation evidence, the authorised representative's ID, the place-of-business check, the risk-indicator review — and above AED 375,000 the bank confirmation and the public-information review.
• For each in-scope supply: the commercial reason, the payment method and route, the price check, the licensed-activity check and, for goods, origin and ownership.
• Who carried out and reviewed the checks, when, and the conclusion — including any open points.
• Your written verification policy (Article 5(4)).

Verification does not guarantee that input tax will be accepted, but undocumented checks are hard to rely on later. Our checklist lists every item.

Who decides what

• Your business remains responsible for the verification and for deducting input tax.
• Your tax adviser advises on VAT treatment and on whether input tax can be deducted in a particular case.
• Next Horizons carries out and documents the verification work: we contact your suppliers, collect and review the evidence, follow up what is missing and deliver a report your adviser can work with. We are not a tax agent and do not represent you before the FTA.