Introduction
This blog aims at giving you a clear understanding of everything you need to know about Tax Invoices in the UAE region. This is based on the FTA guidelines that govern them. Any registered business in the United Arab Emirates that is required to collect VAT (Value Added Tax) must submit a tax invoice for each taxable supply it makes to its clients, according to the Federal Tax Authority (FTA) Law. A tax invoice is a record of a transaction’s specifics, including the amount of tax charged.
Tax Invoice
Tax invoices in the UAE are considered significant for businesses in the region, for several reasons. First, it helps companies comply with their tax obligations by providing a transparent record of their taxable transactions. Second, it allows customers to claim input tax credits on the tax charged by the supplier, as tax invoices are required to be issued for the customer to claim input tax credits.
The FTA may penalize businesses that fail to issue tax invoices in the UAE region or issue incorrect tax invoices.
In conclusion, issuing a tax invoice in the UAE region is crucial to complying with VAT regulations. Failure to comply with tax invoice requirements can have financial and legal consequences.
What are Tax Invoices in the UAE region in accordance with the FTA guidelines?
- A tax invoice (also known as a VAT invoice) is a written or electronic document which records the details of a taxable supply.
- A VAT registered person or business has to provide the recipient of a standard-rated supply of goods or services or a deemed supply of goods or services with only an original tax invoice.
- Tax invoices need to be sent out within 14 days after supply. However, you can send the same recipient a single tax invoice for a bunch of supplies you made during the same month.
- Where a supply is zero-rated, the supplier is not required to issue a tax invoice if sufficient records are available to establish the particulars of a supply.
- Tax invoices are not issued for VAT-exempt supplies.
- If the FTA believes that issuing a tax invoice is impractical, it may decide that tax invoices, or specific details in tax invoices, are not required.
- When a registered agent makes a taxable supply of goods or services, on the principal’s behalf, the agent may issue a tax invoice as if they are making the taxable supply themselves, as long as the principal does not issue a tax invoice as well.
Is it true that FTA places a high priority on Tax Invoices in the UAE region?
It is critical that both suppliers and recipients of goods and services obtain and keep the tax invoices they raise or receive.
For suppliers
Valid tax invoices are critical as they dictate supply time. This may determine which tax period the output tax should be accounted for.
For customers
VAT-registered recipients must obtain a proper tax invoice as it serves as documentation to claim VAT paid on purchases as input tax. In all cases, tax invoices ensure transparency regarding VAT amounts charged.
Requirements for Tax Invoices in the UAE region
A detailed tax invoice should be issued for any taxable supply with a value of AED 10,000 or more.
The detailed tax invoice in the UAE region must include the following information to be valid:
- On the invoice, the words “Tax Invoice” must be clearly visible.
- Name, address, and tax identification number of the supplier.
- The recipient’s name, address, and Tax Registration Number (if registered).
- A sequential or unique number that identifies the tax invoice.
- The date of issue of the invoice (and the date of supply, if different from the invoice date).
- An explanation of the services or goods provided.
- The unit price, quantity supplied, tax rate, and account payable for each product or service are all expressed in AED.
- The amount of any discount (if any).
- The gross amount owing is expressed in AED.
- If an invoice is issued in a currency other than AED, the tax amount in AED and the exchange rate must be specified.
- If an invoice relates to a supply where the recipient must account for reverse charge VAT – a statement that the recipient must self-account for the tax and a reference to the relevant legislation.
- Tax invoices must be issued and delivered to the recipient.
Simplified Tax Invoices in the UAE region
In the United Arab Emirates, a simplified tax invoice has less administrative obligations than a regular tax invoice. It may be sent instead of a regular tax invoice if it relates to a supply made to a non-VAT registered recipient. It also relates to a supply made to a VAT registered recipient but the consideration for the supply is less than AED 10,000.
A simplified tax invoice must contain:
- The invoice clearly states “Tax Invoice.”
- The supplier’s name, address, and tax identification number are included.
- A summary of the products or services offered.
- Date of issue of the tax invoice.
- The total consideration and the tax charged.
For example,
Apples 10.00
Bananas at 15.00
Milk 10.50
Total 35.50
VAT 1.69
Rounding up invoices
The value may be rounded to the nearest fils mathematically in line with Article 61 of the Executive Regulations. This is where a tax invoice must be produced and the tax charged on the supply is determined as a fraction of a fils.
As previously stated, the tax amount should be calculated line by line on a full tax invoice. In reality, this means that rounding should also be done line-by-line.
The term “mathematically rounding the value” refers to applying mathematical logic to round the tax value listed on the tax invoice to the closest entire Fils (i.e., to 2 decimal places).
For example, 2.357 AED would become 2.36.
9.862 AED would become 9.86.
Tax invoices issued in foreign currencies
Article 59 of the Executive Regulations mandates that the following information be displayed on tax invoices issued in currencies other than AED:
The tax amount payable is expressed in AED; and
As per the UAE Central Bank’s exchange rate on the date of supply, the exchange rate becomes significant.
As a result, businesses issuing invoices in foreign currencies which do not display the tax value in AED as mentioned above, fail to issue a valid tax invoice for VAT purposes.
VAT on Discounted Invoices
Upon calculation of the discount, VAT will be charged towards the value. VAT will be charged on the prices following the discount.
The discount will be allowed to be reduced from the value of supply only if the following conditions prescribed in UAE VAT Executive regulations are met:
- The customer has benefited from the price reduction
- The supplier funded the discount
For example, the supply value is AED 10,000 and the discount is AED 500. In this case, the supply value will be AED 9,500 which is arrived at after considering the discount value. AED 9,500 will be subject to VAT.
Note:
It’s imperative to note that businesses must retain a copy of all tax invoices issued for five years.
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