Input Tax Credit (ITC) Verification Compliance

Group Policy & Procedure	Document No.	P-POL-032
Group Supply Chain	Ver. No. | Rev Date	0.1 | 21 AUG 2026
Title: Input Tax Credit (ITC) Verification Compliance	Effective Date	1 October 2026

BUKHATIR GROUP

Strength through Diversity

Group Policy and Procedure

Group Supply Chain (GSC)

Input Tax Credit (ITC) Verification Compliance

FTA Decision No. 13 of 2026 — Supplier & Supply Verification

Document No: P-POL-032

Copyright © 2026 Bukhatir Group

Revision Control

This document is issued under the authority of Bukhatir Group and applies when carrying out the activities described. Revisions may be issued as necessary under the authority of the Group Head of Procurement. Revision history is recorded below with every revised policy.

Revision History

Ver. No.	Effective Date	Description
0.1	01 October 2026	New policy — FTA Decision No. 13 of 2026 ITC verification compliance

Revision Sign-Off

Approving Committee	Name	Signature
Endorsed by — Group Head of Supply Chain	Mohamad Koussa
Reviewed by — BIIL CEO	Mr. Ayman Ismail
Reviewed by — Group Chief Financial Officer	Mohamed Adnaan Sait
Approved by — Chairman & Group CEO	Mr. Salah Bukhatir

Distribution List

#	Departments
1	Business Unit Procurement Departments
2	Group Supply Chain (GSC)
3	Finance, Legal, Compliance, Internal Audit
4	Business Unit Management
5	Tax / VAT Department

1. Purpose & Objective

This policy establishes the measures, procedures and conditions that Bukhatir Group entities must follow to verify the validity and integrity of supplies received from suppliers before deducting Input Tax (VAT), in compliance with Federal Tax Authority Decision No. 13 of 2026, effective 1 October 2026.

The objective is to ensure that the Group's Input Tax Credit (ITC) claims are supported by verifiable, documented supplier and supply checks, thereby mitigating the risk of ITC denial, penalties, or allegations of involvement in tax evasion.

2. Scope

This policy applies to all Taxable Persons within the Bukhatir Group in relation to the verification of the validity and integrity of supplies they receive before deduction of Input Tax. It covers:

• All purchases of goods, services, works and sub-contracts where VAT is charged

• All suppliers — new and existing — from whom taxable supplies are received

• All payment methods including electronic transfers and cash purchases

• Import transactions where Input Tax is recoverable

3. Regulatory Basis

This policy implements the requirements of:

• Federal Decree-Law No. 8 of 2017 on Value Added Tax, Article 54(bis)

• FTA Decision No. 13 of 2026 — Measures, Procedures and Conditions required by Taxable Persons for the Verification of the Validity and Integrity of the Supplies before Deduction of Input Tax

• Cabinet Decision No. 52 of 2017 on the Executive Regulation of the VAT Law

Effective date: 1 October 2026. All Group entities must be fully compliant by this date.

4. Verification Thresholds & Exceptions

The FTA Decision sets monetary thresholds that determine the level of verification required:

Threshold	Condition	Verification Requirement
< AED 10,000	Single supply consideration (excl. VAT)	May be exempted from verification (see exception below)
≥ AED 10,000	Single supply consideration (excl. VAT)	Full supplier and supply verification required
> AED 100,000	Total supplies from one supplier over 12 months	AED 10,000 exception does not apply — full verification required for all supplies
> AED 375,000	Total supplies from one supplier over 12 months (actual or expected)	Enhanced verification: bank account confirmation + public review assessment

Exception: A Taxable Person may disregard the verification measures on supplies where the consideration (excl. VAT) is less than AED 10,000. However, this exception does NOT apply where the total value of supplies received from the same supplier exceeds AED 100,000 over the previous or next 12 months.

5. Supplier Verification Requirements

Before claiming Input Tax, the following supplier verification must be completed per FTA Decision No. 13, Article 3. Verification must occur when dealing with a supplier for the first time, and must be renewed at least every 12 months.

5.1 Identity Verification

a) Natural person supplier: Obtain a copy of valid Emirates ID or passport. Meet the supplier in person or virtually before making the supply.

b) Legal person supplier: Verify incorporation through official databases or obtain a copy of the certificate of incorporation. Confirm that the entity's name, address, and employees match. Verify the identity of the director, agent, or authorized employee (Emirates ID or passport).

5.2 Address & Place of Business Verification

a) Verify the existence of an actual place of business using electronic means or by conducting a field visit.

b) Ensure the place of business is compatible with the nature of the supplier's activities.

5.3 Risk Assessment

The Taxable Person shall assess the following risk indicators:

#	Risk Indicator	Action Required
1	Supplier changed address more than twice in previous 12 months	Retain clear and justified explanation; submit to FTA upon request
2	Supplier changed key employees / managers more than twice in previous 12 months	Retain clear and justified explanation; submit to FTA upon request
3	Disproportionate or unexpected transactions relative to supplier size and history	Retain clear and justified explanation; must not contradict available evidence

Where any risk indicator applies, retain a clear and justified explanation. The explanation must not contradict available evidence or information, and must be submitted to the FTA upon request.

5.4 Bank Account & Public Review (Supplies > AED 375,000/12 months)

Where the value of supplies from the supplier exceeds AED 375,000 over the previous 12 months, or is expected to exceed AED 375,000 over the next 12 months:

a) Obtain a written bank confirmation from an authorized bank in the UAE confirming the supplier has a bank account, free of reservations or conditions. The confirmation need not be issued to the recipient of the supply.

b) Review publicly available reviews and media coverage from reliable sources, ensuring consistency with the nature and size of the supplier's business and no indicators of suspected tax evasion.

6. Supply Verification Requirements

Each taxable supply received must be verified per FTA Decision No. 13, Article 4, before the Input Tax is claimed.

6.1 General Assessment

a) Conduct a general assessment of the supply conditions related to the transaction.

b) Ensure the supplier's engagement in the transaction is based on genuine commercial reasons.

6.2 Payment Conditions

a) Payment methods must be justifiable for commercial reasons. Where a third party is involved in payment, or payment is made to a bank account outside the supplier's country of incorporation, there must be a reasonable commercial explanation.

b) Payment for the supply shall be made by electronic means. Cash payments must be based on a documented commercial reason, within the thresholds specified in applicable tax legislation, and easily verifiable.

6.3 Supply Circumstances

a) Verify that prices or profit margins are not commercially unjustifiable or significantly different from market conditions without clear reason.

b) Verify that supplies do not fall outside the supplier's ordinary activity or licensed commercial activities.

c) Verify the authenticity and origin of goods received, and the supplier's ownership or right to dispose of the goods.

d) Where the supplier acts as an intermediary, verify there is a clear and justifiable commercial explanation for the supplier's role in the supply.

7. Verification Procedures

For each supplier and each supply received, the following procedures must be followed:

1. Verify the supplier in accordance with Section 5 of this policy when dealing with the supplier for the first time, or upon recurrent dealings where the supplier has not been verified in the previous 12 months.

2. Verify each taxable supply received or accepted in accordance with Section 6 of this policy.

3. Document all verification steps taken and retain supporting documents and records, enabling the FTA to verify the correctness of implementation.

4. Maintain this documented policy identifying the persons responsible for implementing, reviewing, and supervising the verification procedures, including their powers and responsibilities. This policy shall be retained at the designated location for document retention.

8. Roles & Responsibilities

Activity	Procurement	Finance / Tax	BU Requester	GSC
Supplier identity verification	R	C	I	A
Address / place of business check	R	C	I	A
Risk indicator assessment	R	C	I	A
Bank account verification (>375K)	R	R	I	A
Supply general assessment	R	C	R	A
Payment method verification	C	R	I	A
Supply circumstances check	R	C	R	A
Documentation & record retention	R	R	I	A
Annual ITC verification audit	C	R	I	A

R = Responsible, A = Accountable, C = Consulted, I = Informed

9. Record Retention & Documentation

All ITC verification records must be retained for a minimum of 5 years from the end of the tax period in which the supply was received, including:

• Completed F-ITC-01 Supplier ITC Verification Checklists

• Completed F-ITC-02 Supply ITC Verification Checklists

• Copies of supplier identity documents (Emirates ID, passport, trade license, certificate of incorporation)

• Bank confirmation letters (for suppliers exceeding AED 375,000 threshold)

• Risk indicator assessment records and justifications

• Evidence of address / place of business verification

• Payment records and evidence of electronic payment

• Any explanations retained under the risk indicator assessment

Records shall be stored in the Group's document management system and made available to the FTA upon request within 5 business days.

10. Performance Indicators (KPIs)

KPI	Target	Frequency
Supplier verification completion rate	100%	Per supplier onboarding / annual renewal
Supply verification compliance rate	≥ 99%	Per transaction
Documentation completeness for ITC claims	100%	Monthly audit sample
Risk indicator review turnaround	≤ 5 business days	Per occurrence
Annual supplier re-verification on time	100%	Annual

11. Reference Forms

• Form F-ITC-01 — Supplier ITC Verification Checklist

• Form F-ITC-02 — Supply ITC Verification Checklist

• Form F-VMD-01 — Vendor Registration Request Form

• Form F-SPR-01 — Supplier Performance Scorecard

12. Related Documents

• P-POL-006 — Supplier Evaluation & Management

• P-POL-020 — Vendor Master Data Management

• P-POL-023 — Payment Terms & Invoice Processing

• P-POL-030 — Cash Purchases

• P-POL-005 — Purchase Orders

• P-POL-027 — Procurement Audit & Compliance

• P-POL-016 — Risk Management in Procurement

• P-POL-025 — Import, Customs & Logistics

• FTA Decision No. 13 of 2026

13. Definitions & Acronyms

Acronym / Term	Definition
ASL	Approved Supplier List
BU	Business Unit
FTA	Federal Tax Authority
GSC	Group Supply Chain
ITC	Input Tax Credit
KPI	Key Performance Indicator
PO	Purchase Order
TRN	Tax Registration Number
VAT	Value Added Tax

14. Review & Ownership

This policy is owned by Group Supply Chain in coordination with Group Finance / Tax. It is reviewed annually or upon any amendment to FTA regulations affecting ITC conditions. Next review: October 2027.