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In UAE, mandatory VAT registration is required only for those businesses whose value of supplies exceeds AED 375,000 in previous 12 months or anticipated to exceed in next 30 days during the current financial year. For businesses with value of Supplies / Taxable Expenses exceeding AED 187,500 in previous 12 Months or anticipated to exceed in next 30 days during the current financial year, the VAT registration is optional.
In UAE VAT, a special provision is incorporated to handle the output VAT Tax adjustment. The UAE VAT law allows output VAT adjustment if any of the following events occur after the supply of goods and services:
On the occurrence of any of the events mentioned above, the output VAT previously calculated requires an adjustment. The Tax adjustment can result in increase or decrease in output VAT. In case, at the time of sale, if the place of supply was identified as inside the State and later, during movement of goods, it was found that the supply would finally be treated as being outside the State, it will not be considered as an error in charging tax in the invoice and output VAT adjustment is not allowed.
For example, on 25th March, 2018, Abdul Traders, located in Dubai, supplied goods to Ali Enterprises for AED 50,000 + VAT AED 2,500. On 5th April, 2018, Ali Enterprises returned goods worth AED 10,000.
In the above case, Abdul Traders should make an output VAT adjustment by recording a credit note for the value of AED 10,000 + VAT AED 500. After adjustment, Abdul Trader’s output VAT liability will be AED 2,000.
To know more on credit note, please read Credit Note: Document for return of goods under VAT in UAE and Tax Credit Note under VAT in UAE.
The supplier will be allowed to adjust the output VAT on the occurrence of any of the events discussed above, only when any of the following conditions are met:
VAT Returns are submitted for the Tax Period during which the supply occurred and an amount was incorrectly calculated as the amount of Output Tax due to the occurrence of any of the events discussed above.
The output VAT adjustment on the instances discussed above should be adjusted in the following manner: