Staying compliant and updated with the ever-changing tax regulations in the United Arab Emirates (UAE) is crucial. Value Added Tax (VAT), one of the taxes imposed on taxable goods or services, was introduced in the UAE in January 2018.
Whether you are an entrepreneur starting out or an established business in the UAE, registering your business under VAT and issuing accurate VAT invoices is an extremely vital task.
What is a UAE VAT Invoice?
A document delivered to a customer by a VAT-registered company in the UAE for products or services sold is known as a UAE VAT invoice. It also gives your VAT-registered clients the ability to recover any VAT that was applied to them.
Different Types of UAE VAT Invoices
In the UAE, invoices for taxes are critical for recording transactions and ensuring VAT compliance. Businesses mainly need to be aware of two kinds of tax invoices:
1. Full Tax Invoice
2. Simplified Tax Invoice
Full Tax Invoice
A Full Tax Invoice is generated when taxable supplies are made to other VAT-registered businesses (business-to-business transactions) or when the transaction value exceeds AED 10,000. A registrant must provide legitimate tax invoices for every taxable supply of goods or services.
For this kind of invoicing, complete information is necessary to ensure proper documentation and compliance.
The Tax Invoices issued by the registrant must meet the following necessary criteria:
- The invoice should contain the word “Tax Invoice”
- The supplier’s name, address, and Tax Registration Number (TRN)
- The recipient’s name, address, and TRN (if registered for VAT)
- A sequential or unique invoice number (an invoice number that identifies a tax invoice and its number in any order of invoices is known as a sequential or unique invoice number)
- Date of Issuance
- The date of supply shall be mentioned if it differs from the date of issuance
The tax invoice must include the following contents:
- An explanation of the products or services offered
- Each commodity or service’s unit price, quantity or volume of delivery, payable VAT rate, and payable amount (in AED)
- Any discounted rates that are offered
- The total amount owed (in AED)
- The applicable exchange rate and the amount of tax payable (in AED)
- If the recipient is required to account for VAT (under the reverse charge mechanism), the invoice must include a reference to this and a reference to the relevant provision of the law
Simplified Tax Invoice
A Simplified Tax Invoice is issued if a transaction is smaller than AED 10,000 or involves taxable supply to end users (business to consumer). Despite being less comprehensive, this kind of invoice nonetheless has all the pertinent data that the Federal Tax Authority (FTA) requires.
The Simplified Invoice must contain each of the following details:
- The invoice should contain the word “Tax Invoice”
- The registered supplier’s name, address, and TRN
- The date the tax invoice was issued on (i.e., date of issuance)
- A proper description of the products or services offered
- The total amount paid and the amount of VAT assessed
Transactions subject to VAT are divided into three categories:
- All supplies are subject to a VAT of 5%
- All supplies are subject to a VAT rate of zero
- Import of goods and services
1. Which supplies are subject to 5% VAT?
All supplies that fall within the scope of UAE VAT are not subject to the zero rate.
2. Which supplies are subject to VAT at zero rate?
As an exception, the following supplies are liable for VAT at the zero rate, provided that specific requirements for each are satisfied as per the FTA:
- Export of goods and services
- International transport of goods and passengers and transport-related services
- Transportation services such as trains, sea vessels, and aircraft, and goods and services related to such means of transport
- First supply of residential buildings (lease or sale) within 3 years of finalising their construction
- Airplanes and marine vessels designed for rescue or aid through air or sea
- Certain precious investment metals
- First supply of buildings specifically designed for charitable institutions (lease or sale)
- First supply of buildings that were converted from non-residential to residential units (lease or sale)
- Crude oil and natural gas
- Certain educational services and related goods and services
- Necessary and preventive healthcare services and related goods
3. Which supplies are exempt from VAT?
- Certain financial services
- Supply of residential units (lease or sale), if such supply is not subject to zero-rate
- Bare land
- Local passenger transport
VAT Invoice Compliance and Recordkeeping
1. Timeframes for issuing VAT invoices
Tax invoices should be issued within 14 days of the date of supply.
2. Proper storage and retention of VAT invoices for tax audits
- Tax invoices must be filed for a minimum of five years following the date of supply, both issued and received.
- To guarantee accessibility during tax audits, digital records must be preserved securely for a smooth process.
3. Digital recordkeeping and archiving of e-invoices
- The Federal Tax Authority (FTA) encourages businesses to use e-invoices.
- Digital records need to be kept in a format that makes it simple and retrievable for the FTA to audit them.
- If an invoice is issued in a currency other than Emirati Dirhams (AED), the tax amount in AED and exchange rate must be mentioned.
Conclusion
Issuing a Tax Invoice in the UAE is considered as an essential task for maintaining compliance and optimising operations as per the requirements and rules established by the UAE government authorities. The invoicing process can be streamlined and mitigate potential risks by adhering to the fundamental components, adhering to the strict regulations and utilising technology efficiently.
The tax experts at Gatestone Group are ready to assist businesses in navigating the complexities of UAE Tax Invoicing to ensure compliance and streamline your financial operations. Book a free consultation, contact us via email at [email protected] or call +971 4 450 1023.
FAQs
Every time a registered taxable person provides taxable goods or services to a final consumer or another registered taxable person, a tax invoice must be sent.
A UAE VAT Invoice must include the word “Tax Invoice”, the supplier and customer information, unique invoice number, date of Issuance, and the date of supply shall be mentioned if it differs from the date of issuance. The description of goods or services, quantity, VAT rate, and total price (including and excluding VAT), must be included on a standard UAE VAT invoice.
No, tax invoices can only be issued by registered taxable persons. Businesses that are not registered are not allowed to charge VAT and are not required to provide VAT invoices.
