VAT Invoice in UAE
Under VAT in UAE, recording the occurrence of taxable supplies and maintenance of these records is of utmost importance. Tax Invoices are documents to be issued by registrants to record the occurrence of a taxable supply. These Tax Invoices also form the basis for furnishing VAT returns as well as documentary evidence to support input VAT deduction claims. These can be in written or electronic form. Let us understand in detail various aspects of VAT invoice in UAE.
VAT invoice Types
In UAE, VAT invoices can be of two types:
A Tax Invoice is to be issued by registered suppliers for supplies to registered recipients where the consideration for the supply exceeds AED 10,000.
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2.Simplified Tax Invoice
A Simplified Tax Invoice is be issued by registered suppliers in either of the following cases:
- a. The recipient is not registered under VAT
- b. The recipient is a registrant and consideration for the supply does not exceed AED 10,000
Hence, a Simplified Tax Invoice would most commonly be used by retail businesses and businesses which supply to unregistered businesses or make supplies not exceeding AED 10,000 to registrants. It is a simplified version of the Tax Invoice, where fewer details are required to be mentioned.
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Note: When a supply is a wholly zero rated supply under VAT (for example, supply of educational services, essential healthcare services, etc.), and there are or will be sufficient records to establish the details of the supply, the supplier is not required to issue a Tax Invoice.
Document for supplies to other GCC states
When a registrant supplies goods or services to other GCC states, the document should not be labelled as 'Tax Invoice' and no tax should be charged on the supply. The document should contain all the details required in a Tax Invoice and the following additional details:
- a. The TRN (Tax Registration Number) of the recipient
- b. A statement identifying that the supply is between UAE and the other GCC state.
When should Tax Invoice be issued?
Tax invoice should be issued within 14 days from the date of supply.
How should I round off VAT amounts in a Tax Invoice?
In a Tax Invoice, if the VAT chargeable is calculated as a fraction of a fils, the VAT amount can be rounded to the nearest fils on the basis of mathematical rounding, i.e. if the fraction is less than 0.5, it is rounded downward to the nearest fils and if the fraction is 0.5 or more, it is rounded upward to the nearest fils.
For example: If the VAT amount in a Tax Invoice is AED 100.40, the VAT amount can be rounded to AED 100 and if the VAT amount in a Tax Invoice is AED 100.60, the VAT amount can be rounded to AED 101.
Which currency should be used in a Tax Invoice?
The currency to be used in a Tax Invoice is UAE Dirham. If the supply is in a currency other than UAE Dirham, the amount shown in the invoice should be converted to UAE Dirham according to the exchange rate approved by the Central Bank as on the date of supply.
Conditions for issuing Tax Invoice in electronic form
If a registrant issues Tax invoices in electronic form, the following conditions need to be met:
- a. The supplier should be capable of securely storing a copy of the electronic Tax Invoice as per the record keeping requirements.
- b. The authenticity of origin and integrity of content of the electronic Tax Invoice should be guaranteed.
How long Tax Invoices should be retained?
All Tax Invoices received and issued should be retained for at least 5 years from the end of the year to which the invoice pertains.
For example: A Tax Invoice issued on 5th January, '18 should be retained till 31st December '23.
In case of real estate properties, Tax Invoices should be retained for at least 15 years.
Note that issuing a Tax Invoice for every taxable supply of goods or services and ensuring that the Tax Invoice issued contains the required details is extremely important. Failure to do so will attract an Administrative Penalty. The task of ensuring that invoices are issued for every taxable supply, in the required format and with the required details can be made easier and automatic with the use of a software. Businesses should evaluate and decide a software which will help them with swifter and accurate compliance under VAT in UAE.