Tax Invoices
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Tax Invoices

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It has been noticed that many taxable persons have sought clarity over the tax invoices and what should they include. According to the Federal Tax Authority, matters related to tax invoices must always be taken into consideration by taxable persons.

It is a legal requirement that a tax invoice is issued by the supplier, provided that they are tax-registered and then delivered to the buyer in each sale or transaction. This rule applies even if the tax invoice issued is a simplified tax invoice. Tax invoices are not provided only upon request of the recipient.

What is a simplified tax invoice?

The Federal Tax Authority has allowed taxable persons to issue simplified tax invoices rather than issuing a complete tax invoice if:

  • The recipient of the supply is not tax-registered; or
  • The total invoice value excluding VAT is AED 10,000 or less, even if the recipient is tax-registered.

Requirements of a simplified tax invoice:

  1. “Tax Invoice” must be clearly shown on the document;
  2. Name, address and TRN of the recipient;
  3. Tax invoice date and number;
  4. Description of the goods or services supplier;
  5. Total consideration (i.e. Gross Value) and tax amount charged.

For each line item in a simplified tax invoice, total amounts including VAT must be shown. There is no need for taxable persons to show the amounts exclusive of tax for each line item in the simplified tax invoice. Only total VAT charged on the invoice must be shown at the bottom of the simplified tax invoice. For example:

Books                   10.00

Pens                      7.50

Pencils                  4.50

Total                     22.00

VAT                      1.05

Full tax invoices

Full tax invoices must be issued when the following two cases are satisfied:

  1. The recipient is tax-registered, and
  2. The total invoice excluding VAT is more than AED 10,000.

All requirements of the simplified tax invoice must be satisfied in the full tax invoice, in addition to the following for each line item:

  1. The unit price;
  2. The quantity or volume supplied;
  3. Total amount exclusive of VAT
  4. Tax rate; and
  5. VAT Amount.

Full tax invoices must then show the total gross amount of all items included in the full tax invoice, in AED. There is no need to include the total amount inclusive of VAT for each line item in a full tax invoice.

Note: companies eligible to apply the profit-margin scheme must understand that they must not show the VAT amount of the particular supply on the tax invoice or any other related document. (Please refer to the profit-margin scheme article for more information)

Tax invoices issued in foreign currencies

In cases where tax invoices are issued in foreign currencies, the Federal Tax Authority urges the following to be shown on the invoice:

  1. Tax amount converted to AED, and
  2. The exchange rate used (as per the rates approved by the UAE Central Bank on the date of supply)

Rounding Invoices

The Federal Tax Authority have permitted taxable persons to round the tax amount to the nearest fils. The rounding process must be made to each line item separately, and not to the total tax amount. After rounding the tax amount to each line item on the invoice, the total tax amount will automatically become rounded to the nearest fils. Rounding examples:

               2.49358 becomes 2.49

               43.58741 becomes 43.59

               99.99721 becomes 100.00

It is very important for taxable persons to understand that, as per the Federal Tax Authority, submitting VAT Reports on time and making payments accordingly, shall not make the taxable person completely VAT compliant, in which according to the “VAT Law and the “Executive Regulations” there are many other important matters that taxable persons should apply to be compliant such as, tax invoices, supporting documents, VAT inputs and many more.

Ziad Khawaja
Fame Legacy DMCC
Tax Assistant Manager – Tax Agent, TAAN: 20040382

Author: admin

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