How to issue a Tax Invoice to unregistered customers?
The UAE is the fifth largest market in the world in terms of global retail. Many businesses in UAE solely or mostly supply goods and services to recipients who are not registered under VAT.
For example:Supermarkets, retail outlets, restaurants, etc. There are also many businesses which mostly supply goods and services to registrants and once in a while, supply to persons who are not registered under VAT in UAE.
In these cases, should such businesses issue the detailed Tax Invoice for such supplies, containing all the mandatory details that are required in a Tax Invoice? For businesses which deal mostly with customers who are not registered under VAT in UAE, it is a difficult task to provide all the details required in a VATTax Invoice, such as the address of the recipient. At the same time, issue of an invoice evidencing that a supply has taken place is of utmost importance.
To solve this dilemma, the VAT Law provides for the facility to issue 'Simplified Tax Invoices' when a person registered under VAT makes supplies to persons who are not registered under VAT. Here, the recipients could be retail customers as well as businesses whose turnover does not exceed the threshold limit to register under VAT. You can visit our blog 'Registration under VAT' for more details of the requirements to register under VAT in UAE.
Let us take an example to understand how a registrant can issue simplified Tax Invoices under VAT.
Example: Jehan & Co., a registrant in Abu Dhabi, supplies 2 keyboards to a consumer, Mr. Ali, in Dubai. The simplified Tax Invoice to be issued by Jehan & Co. appears as shown below:
As you can observe, the details mandatorily required in a simplified Tax Invoice are lesser than the details required in a Tax Invoice. A key benefit of a simplified Tax Invoice is that the recipient’s name and address are not required. This becomes very useful for businesses which regularly deal with consumers or unregistered businesses. Such businesses can now easily configure the software they are using in their business for billing and for processing quicker invoices.
Finally, let us answer some FAQs that businesses have, with regard to simplified Tax Invoices.
FAQ 1: Should the title of simplified Tax Invoice be 'Simplified Tax Invoice'?
Answer: No, the title of a simplified Tax Invoice’ should be 'Tax Invoice'.
FAQ 2: What is the key difference between a Tax Invoice and a simplified Tax Invoice?
Answer: The key difference between a Tax Invoice and a simplified Tax Invoice is that in a simplified Tax Invoice, the recipient’s details, i.e. name and address are not required.
FAQ 3: Should VAT be charged on supplies for which simplified Tax Invoice is issued?
Answer: Yes, VAT at the standard rate of 5% should be charged in a simplified Tax Invoice.
FAQ 4: Is a simplified Tax Invoice a valid document for input tax recovery?
Answer: No, a simplified Tax Invoice is not a valid document for input tax recovery, as the recipient’s TRN details are not mentioned therein. Hence, if you are a registered business, ensure that a Tax Invoice containing your TRN is issued by the supplier to you.