My supplier is involved in tax evasion I knew nothing about — do I get penalized too?
If a supplier I dealt with turns out to be involved in tax evasion, does that affect my right to recover input tax?
Under Federal Decree-Law No. 16 of 2025, effective 1 January 2026, the authority now has clearer power to deny input tax recovery where a transaction is connected to tax evasion and you knew about it, or reasonably should have known — based on the circumstances — that the transaction was treated incorrectly for VAT (for example, reverse charge misapplied, VAT charged on an exempt or zero-rated supply, VAT charged by an unregistered supplier, or a supply that was out of scope entirely). That means you can't rely solely on how a VAT invoice looks on its face — the responsibility now extends to the substance of the transaction itself.
Screening new suppliers and documenting a reasonable basis for dealing with them has become an important preventive step, not a luxury. At RASEEKH, we advise clients to run a basic check on any new supplier before large transactions begin.