Understanding Tax Invoice Under VAT in the UAE

The UAE government’s introduction of the Value Added Tax (VAT) aims to diversify its revenue streams, reducing dependency on the oil and gas sector. As VAT is a relatively new concept in the region, both businesses and consumers may find it unfamiliar. Incidents have emerged where businesses, unauthorized for VAT collection, have nevertheless collected it. Additionally, some companies remain unclear about VAT’s proper application.

To ensure transparency, it’s advisable for consumers to request a VAT receipt or Tax Invoice. Here, we delve deeper into understanding the Tax Invoice in the UAE.

What Constitutes a Tax Invoice?

The Federal Law Number (8) of 2017 on VAT outlines specific requirements for a Tax Invoice. Failing to meet these could lead to administrative penalties. For transactions involving assessable supplies exceeding AED 10,000, registrants are mandated to issue a tax invoice.

Tax Invoices: Categories and Essentials

1. Simplified Tax Invoice: Predominantly used in supermarkets and the retail sector, a Simplified Tax Invoice offers basic information and is issued to clients who aren’t obligated to provide a VAT number. It typically includes:
   • The label “Tax Invoice”.
   • Name, address, and Tax Registration Number (TRN) of the registrant.
   • Date of the goods’ transfer.
   • A description of the goods or services provided.
   • Total tax amount charged.
2. Detailed Tax Invoice: This more comprehensive invoice entails:
   • The label “Tax Invoice”.
   • Name, address, and TRN of the registrant.
   • Place of the registrant’s establishment.
   • A unique Tax Invoice number for easy identification.
   • Date of issue and, if different, the date of supply.
   • Detailed description of the goods or services.
   • Goods or services’ price, total supplied quantity, tax levied, and total amount payable.
   • Discounts, if applicable.
   • Total payable amount in AED.
   • If the invoice involves foreign currency, the exchange rate to Dirhams should be mentioned.

Article 59 of the VAT Regulations provides a standard format for a Tax Invoice. Eligible VAT-collecting companies must ensure their tax invoices adhere to the aforementioned criteria, or they risk potential penalties.

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