Under the UAE’s VAT system, the Federal Tax Authority (FTA) has defined the tax invoice formats that every business needs to follow. Companies making VAT supplies are required to issue a tax invoice Dubai with a Tax Registration Number (TRN) on it. Any company failing to comply with the invoicing rules is subject to fines and penalties imposed by the FTA. Therefore, businesses must be well informed of various tax invoices in the UAE, the rules governing the issuance of tax invoices, and the administrative challenges pertaining to non-compliance with the VAT regulations.
Value Added Tax (VAT) – Overview
Value Added Tax, commonly referred to as a consumption tax, is an indirect tax levied on products and services at each stage of the supply chain. The amount of VAT charged on a product depends on its total cost and the intermediate stages from the point of production to the sale point.
The VAT collected by the seller is based on the purchases made by the consumer. Unlike income tax which is imposed based on an individual’s earnings, VAT is applied equally to every purchase.
VAT/Tax invoice in UAE
A tax invoice or tax bill is a document issued by the seller or supplier of the product to its buyer. According to the UAE VAT law, issuing tax invoices is mandatory in business-to-business (B2B) sales where the total value of the supplied goods is more than AED 10,000. On the other hand, for sales less than AED 10,000, the supplier can choose to issue a simplified tax invoice.
Thus, every business, except small and retail businesses, operating in the UAE is required to issue a tax invoice Dubai. Additionally, this bill is significant for buyers as they can use it to claim an input tax deduction. Therefore, sellers must ensure that the tax invoices are prepared accurately with proper details.
Purpose of Tax Invoice in the UAE
While exploring the multidimensional domain of tax invoice Dubai, it is necessary to uncover the major purposes that drive its existence and why businesses are required to abide by the intricacies of tax invoices.
- Serves as a pillar of legality, allowing businesses to conduct taxable transactions within the UAE.
- Used to document the intricate details of financial transactions, thus maintaining the financial health of the organization.
- Helps in retaining impeccable records of sales and purchases.
- Serve as the keystone for VAT calculation and reporting, enabling businesses to fulfill their tax obligations accurately.
- Helps in dispute resolution by serving as the ultimate reference point during buyer-seller conflicts.
- Enables input tax recovery, affecting the overall tax liability of the organization.
Thus, Tax Invoice Dubai is necessary to ensure financial compliance, transparency, and business stability in the UAE. Understanding its objectives will help navigate the complexities of taxation in the dynamic economic landscape of the UAE.
Types of Tax Invoice in the UAE
Two types of tax invoices can be issued under the VAT law –
- Simplified tax invoice
- Full tax invoice
Simplified Tax Invoice
This is a simplified version of a tax invoice Dubai. Hence, only a few details are mentioned in this invoice, and is much easier to generate and fill in compared to a detailed or full tax invoice. A simplified tax invoice is issued for taxable supplies in either of the following cases:-
- The recipient of the goods is not VAT-registered
- The consideration for the supply made to a VAT-registered recipient is below AED 10,000
Mandatory fields in a simplified tax invoice:-
- The term “Tax Invoice” clearly displayed in a prominent place
- Name, TRN & address of the supplier
- Date of issuance of the invoice
- Description of goods or services supplied
- Total amount payable
- Total VAT payable
Full Tax Invoice
Generally, businesses in the UAE are required to issue a full tax invoice Dubai. In addition, if the consideration for the supply made to the recipient is above AED 10,000, in that case, issuing full tax invoice is mandatory.
Mandatory fields in a full tax invoice:-
- The term “Tax invoice” mentioned clearly
- Name, TRN, address of the seller
- Name, TRN, address of the buyer
- A unique identifying number
- The date on which the invoice is issued
- Date of supply (if it is different from the invoice issue date)
- Description of supplied goods or services
- Price per unit, supplied quantity, tax rate, and the amount payable
- Discounts (if any)
- Gross value payable
- VAT payable
- Reverse charge declaration (if applicable)
Conditions for Issuing Tax Invoices in UAE
Article 59 of the Executive Regulations specifies the conditions and obligations that taxable entities need to meet while issuing a tax invoice in UAE.
- Businesses must issue a tax invoice Dubai in all cases of supply and deliver it to the recipient of the goods.
- While issuing a simplified tax invoice, businesses are not required to mention the net value for line items.
- While issuing a detailed tax invoice, businesses must display the tax value and net value for line items. However, they can avoid mentioning the gross value.
- Businesses must issue tax invoices in the official currency of the UAE, which is Dirham (AED).
- Businesses issuing tax invoices in a foreign currency must show the amount converted to AED, including the exchange rate used for the conversion.
- Items mentioned in the tax invoice must be rounded to the nearest Fils.
Administrative Penalties Related to Tax Invoice in UAE
Non-compliance with tax invoice requirements in the UAE is punishable under the Tax Procedures Law.
- According to article 25 (o) of Federal Law No. (7) of 2017 on Tax Procedures, businesses failing to issue a tax invoice while making a supply would be subject to a penalty of AED 5,000.
- Businesses that fail to meet the conditions and procedures regarding the issuance of electronic tax Invoices would also be subject to a penalty of AED 5,000.
The key objective behind imposing these penalties is to encourage businesses to maintain proper financial records and books of accounts and follow tax regulations diligently. The tax consultants of Shuraa Tax will help you navigate complex administrative challenges, thereby supporting your overall business growth.
Voluntary Disclosure of VAT in the UAE
Voluntary disclosure is a form provided by the FTA to taxpayers and businesses that allows them to notify about the changes, omissions, and/or mistakes in a tax refund or tax return. It basically allows businesses to rectify their mistakes made during VAT refund or VAT return applications and voluntarily disclose those mistakes to avoid receiving a penalty.
VAT de-registration in the UAE
Entities registered under the FTA for VAT can de-register themselves in the following situations:
- if the business income did not exceed AED 187,500 in 12 months
- if the company stops making taxable supplie
Partner with Shuraa Tax
Shuraa Tax and Accounting Consultancy makes the financial reporting and tax filing process a lot simpler for its clients. The tax consultants of Shuraa provide proper guidance to businesses and help them meet the tax provisions of FTA. Their tax specialists are FTA-certified and are well-versed in controlling and handling tax-related matters. Hence, they will overcome all sorts of tax difficulties in view of the VAT rules and regulations of the UAE.
For any assistance regarding VAT rules and requirements, feel free to reach out to Shuraa Tax at info@shuraatax.com.
