Tax Invoice all you need to know

What is a Tax Invoice?

As per the UAE VAT legislations, a tax invoice is a written, electronic (soft), or e-invoice document  which records the details of a taxable supply (goods or services) which has been made.

VAT Registrant who is subject to the e-Invoicing System must issue and present e-invoices in line with the e-Invoicing System requirements.

There are two types of Tax Invoices, full tax invoice and simple tax invoice. Simple tax invoice has less requirements in terms of the format, and may be issued in the certain situations.

Tax invoice is important for both sellers and buyers.

Issuing a valid tax invoice is important for suppliers as it will determine the tax period in which the VAT charged should be accounted for and paid to the FTA.

Receiving a valid tax invoice is important for buyers as it will serve as the primary evidence for recovering the VAT incurred as input tax.

When must a tax invoice be issued?

A VAT registered business or individual must issue an original tax invoice and present it to the buyer or the recipient in the following scenarios:

• When he makes a Taxable Supply (goods or services) subject to VAT at 5%.
• When he makes a Deemed Supply (free samples, commercial gifts, or goods used for personal use).

When it is NOT required to issue a tax invoice?

A tax invoice is not required to be issued in the following situations:

• When selling goods or services subject to VAT at 0%
• When selling goods or services that are exempt from VAT.
• When selling within the same VAT tax group

Who must issue a tax invoice?

Seller-created tax invoice

Normally, the supplier of goods or services is liable to issue a tax invoice, however, it can be issued by the buyer or the agent of the supplier in certain situations.

Buyer-created tax invoice

In any situation where it may be easier for the buyer to identify the particulars of the supplied goods, he can issue the tax invoice on behalf of the seller. However, they must agree in writing that the seller will not issue a tax invoice in respect of any supply to the buyer. Such invoice must contain all the particulars of a full tax invoice, and must clearly display the words “Tax Invoice raised by buyer”.

The FTA guide gives an example of a scrap metal sold to a scrapyard, the quality and value of scrap metal might not be known until the scrap is received and valued at the scrapyard. In this case the buyer can issue the tax invoice.

Agent-created tax invoice

Where an agent (any VAT registered business or individual) sells goods or services on behalf of a supplier, the agent may issue the tax invoice.

The supply is still treated as being made by the principal supplier to the recipient of the supply, and must account for the relevant VAT and must comply with the record-keeping requirements.

The agent’s tax invoice must show his name, address, and TRN. However, the invoice should reference principal supplier’s name and TRN somewhere on the invoice.

Both agent and supplier must keep records detailing the names, addresses, and TRNs for each other.

Summary tax invoice

Where a supplier makes multiple supplies of goods or services to the same buyer during a month, the supplier may issue a single summary tax invoice for these supplies within 14 days of the end of month.

Date of issuance of a tax invoice

• The full tax invoice must be issued within 14 calendar days of the date of supply.
• The simple tax invoice must b issued at the date of supply.
• The summary tax invoice must be issued within 14 days of the end of calendar month within with the date of supply occurs.

Types of tax invoices in the UAE

There are two types of Tax Invoices, full tax invoice and simple tax invoice. Simple tax invoice has less requirements in terms of the format.

Simple tax invoices may be issued in the following situations:

• Where the buyer is not registered for VAT in the UAE
• Where the buyer is registered for VAT in the UAE, but the total value of the invoice does not exceed AED 10,000.

A Simple Tax Invoice CANNOT be issued where the reverse charge mechanism applies, and where the invoice is created by the buyer.

The format of the Tax invoice

Full Tax Invoice

A valid full tax invoice must contain all the following

1. The words “Tax Invoice” clearly displayed on the invoice
2. Seller’s name, TRN, and address (P.O. Box at minimum)
3. Buyer’s name, address, and TRN (if VAT registered)
4. A sequential or a unique tax invoice number
5. The date of issuing the tax invoice
6. The date of supply (if different from the tax invoice date)
7. A description of the goods or services supplied
8. For each good or service, the unit price, the quantity or volume supplied, the rate of VAT and the amount payable expressed in AED
9. The amount of any discount offered
10. The gross amount payable expressed in AED
11. The tax amount payable expressed in AED together with the rate of exchange applied for invoices in foreign currencies
12. Where the invoice relates to a supply under which the recipient is required to account for VAT, a statement that the recipient is required to account for VAT, and a reference to the relevant provision of the Law. Example: a B2B gold jewellery transaction is subject to reverse charge mechanism where the buyer will account for the VAT (input & output). The Seller shall put the statement in the tax invoice.

Simple Tax Invoice

A valid simple tax invoice must contain all the following:

1. The words “Tax Invoice” clearly displayed on the invoice
2. Seller’s name, TRN, and address (P.O. Box at minimum)
3. The date of issuing the tax invoice
4. A description of the goods or services supplied
5. The total consideration (invoice total)
6. The VAT amount charged
7. Tax Invoice in foreign currency

Tax invoices issued in a foreign currency must show the following:

• The tax amount payable converted to AED
• The exchange rate used for the conversion (as per UAE’s central bank exchange rate at the date of supply)

Rounding

Full tax invoices should be rounded on a line item basis to the nearest Fils (2 decimals)

Simple tax invoices should be rounded on a total basis to the nearest Fils (2 decimals)