Accounts payable: what it means for UAE businesses.

What accounts payable means

Also called: Trade payables, Creditors.

Accounts payable is the total a business owes to its suppliers for goods and services received on credit. It is a current liability on the balance sheet and is managed in a purchase ledger, supplier by supplier, with due dates that drive the payment run.

In the UAE, payables are tied closely to VAT recovery. Input tax can be deducted once the business holds a valid tax invoice and has paid, or intends to pay, the supplier; the VAT Executive Regulation treats a supply as paid for this purpose only if payment is intended within six months after the agreed payment date. If a supplier later writes the debt off and notifies the business, the input tax must be reduced. From 1 October 2026, the Executive Regulation also blocks input tax on supplies above a value set by the Minister of Finance where payment is in cash.

For Corporate Tax, expenses are deducted when incurred on the accrual basis, and recoverable input VAT is not a deductible cost. For an SME, clean payables records protect input tax claims, avoid duplicate payments and make supplier checks easier, which matter more since Federal Decree-Law No. 16 of 2025 allowed the FTA to deny input tax on supplies that form part of a tax evasion arrangement.

How it works

• Each supplier invoice is checked against the order and delivery, then posted: the cost net of recoverable VAT, the input tax separately, and the total to the supplier's account.
• Input tax is recovered in the return for the period in which the tax invoice is held and the payment condition is met (VAT Law, Article 55).
• A supply counts as paid for input tax purposes if the business intends to pay before six months after the agreed payment date (VAT Executive Regulation, Article 54, Clause 2).
• If the supplier writes off the debt and notifies the business, and it has been unpaid for over six months, the input tax is reduced (VAT Law, Article 64, Clause 2).
• From 1 October 2026, input tax cannot be recovered on a supply above a Minister-set value where the consideration is paid in cash (VAT Executive Regulation, Article 54, Clause 3).

Worked example

A Dubai restaurant receives a tax invoice from its meat supplier for a month's deliveries on 60 day terms.

Cost of food supplies, before VAT	AED 50,000
Input VAT at 5%	AED 2,500
Total owed to the supplier	AED 52,500
Input VAT recoverable in the VAT return	AED 2,500
Expense in the profit and loss account	AED 50,000

The expense excludes the recoverable VAT, which is not deductible for Corporate Tax because it is reclaimed through the VAT return instead.

Common mistakes

• Claiming input tax on a pro forma or quotation instead of a valid tax invoice.
• Letting disputed or forgotten supplier balances stay unpaid long past six months after the due date without reviewing the input tax already claimed.
• Paying large invoices in cash, which from 1 October 2026 can block input tax once the Minister sets the threshold.

The law

• Federal Decree-Law No. 8 of 2017 on Value Added Tax, as amended, Article 55 (Recovery of Recoverable Input Tax in the Tax Period) and Article 64, Clause 2 (Adjustment for Bad Debts)
• Cabinet Decision No. 52 of 2017 (VAT Executive Regulation), as amended by Cabinet Decision No. 149 of 2026, Article 54, Clauses 2 and 3 (Special cases of Input tax)
• Federal Decree-Law No. 47 of 2022, as amended, Article 28, Clause 1 (Deductible Expenditure) and Article 33, Clause 7 (recoverable input VAT not deductible)

Frequently asked questions

Can we claim input VAT before we pay the supplier?

Yes, if you hold a valid tax invoice and intend to pay within six months after the agreed payment date. If that intention changes, or the supplier writes off the debt and tells you, the input tax claimed must be adjusted.

What is the cash payment limit for input VAT?

Cabinet Decision No. 149 of 2026 added the rule from 1 October 2026, but the value above which cash payments block recovery is to be set by a separate decision of the Minister of Finance. Check that decision before relying on cash payments for larger purchases.

Related terms

Input tax · Tax invoice · Bad debt relief · Accounts receivable · Working capital. See every term in the UAE tax glossary.

For the full picture, read our guide: Month-end close for UAE SMEs: a practical checklist.

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