As per Article (59) of Cabinet Decision No. (52) of 2017 on the Executive Regulations of the Federal Decree-Law No (8) of 2017 on Value Added Tax, the tax invoice is a written or electronic document in which the occurrence of a Taxable supply is recorded with the details pertaining to it and this should be issued by the registered supplier on taxable supply of goods and services. The recent public clarification provides the better understanding of the tax invoice format and is given as follows:
- What is the sequential numbering in tax invoices? Is it mandatory?
A sequential tax invoice number or a unique number which enables the identification of the Tax Invoice and the order of the Tax Invoice in any sequence is mandatory under VAT law.
For Example: ABC LLP is a registered supplier and issues the Tax invoices to its customers. In this case ABC needs to follow the sequential numbering of the Invoices and this needs to be continued throughout the year. If in the first quarter issues Invoices with number 0001 to 0050, the invoices in the second quarter should start from 0051 and so on.
- When the Invoice raised in any currency other than AED, Is it mandatory to convert the amount to AED? If yes, what amount?
- If the tax invoice is raised in any currency other than AED, then the tax amount payable should be expressed in AED together with the rate of exchange applied.
- The exchange rate should be approved by the central bank as on the date of supply
For Example: MNR LLP has raised the Invoice in USD @ 1000 USD and VAT payable @ 5% on the same is 50 USD then the VAT payable on the same should be expressed as follows:
VAT payable = 50 USD @ 3.67 AED = 183.5 AED.
- What is the date of Issuance of the tax invoice to the recipient of goods or services?
The registrant raising the tax invoice should issue the tax invoice within 14 days as of the date of supply.
- What is the Penalty for not issuing the tax invoices?
- In case of failure by the taxable person to issue the tax invoice or an alternative document when making any supply, and
- In the case of failure by the Taxable Person to comply with the conditions and procedures regarding the issuance of electronic Tax Invoices and electronic Tax Credit Notes,
The penalty shall be as follows:
- 5000 for each tax invoice or alternative document
- 5000 for each incorrect document.
Without prejudice to the provisions of Federal Law No. (7) of 2017 on Tax Procedures, the Authority shall issue an Administrative Penalty Assessment to the Person and notify the Person of the same within five (5) business days as of the date of issuance.
- What is Simplified Tax Invoice?
The format for the Simplified tax invoice shall be as follows:
The taxable person may issue the simplified tax invoice in either of the following situations:
- Where the Recipient of goods or Recipient of services is not a registrant
- Where the Recipient of goods and Recipient of services is a registrant and the consideration for the supply does not exceed AED 10,000.
- What are the documents to be attached with Tax invoice, in case of VAT to be payable by Recipient under RCM?
VAT payable by Recipient under RCM – (Documents along with Tax Invoice)
There will be cases where the Recipient of Goods or Recipient of Services are required to account for tax as per the VAT law, then the following needs to be included along with the tax invoice issued by the registered supplier:
- A statement that the Recipient is required to account for tax and
- A reference to the relevant provisions under the decree law.
- In which case, there is no requirement for separate tax Invoice?
More than one supply of goods and services to same person – (No separate Tax Invoice)
Where the Supplier provides more than one supply of goods and services to the same person in the same calendar month as date of supply, then the supplier need not issue a separate Tax Invoice for the all supplies made and can issue a Summary Tax Invoice which includes the description of all supplies made by him.
- When can a taxable person issue an Electronic Tax Invoice
Electronic Tax Invoice
The taxable person may issue the tax invoice by electronic means in the following cases:
- The Taxable Person must be capable of securely storing a copy of the electronic Tax Invoice in compliance with the record keeping requirements.
- The authenticity of origin and integrity of content of the electronic Tax Invoice should be guaranteed.
- Can a buyer issue the tax invoice for the taxable supply of goods or services?
Tax Invoice raised by the buyer
Even if the recipient of goods and services raises the invoice on behalf of registered supplier of goods and services, it shall be treated as if it had been issued by the supplier if all the following conditions are met:
- The Recipient of the Goods or Services is a Registrant.
- The supplier and the Recipient agree in writing that the supplier shall not issue a Tax Invoice in respect of any supply to which this Clause applies.
- The Tax Invoice shall be in the format as prescribed above.
- The words “Tax Invoice raised by buyer” are clearly displayed on the tax Invoice.
Note: When the Invoice has been issued by the buyer in respect of any supply, then the invoice raised by the supplier in respect of that supply shall not be deemed to be an tax Invoice.
- When can a registered agent issue a tax invoice?
Tax Invoice raised by the Agent who is registrant
- The agent should be a registrant
- Agent issues the invoice on behalf of the principal, in relation to the supply as if that had been made by the agent
- In this case, the principal shall not issue any tax Invoice
- What are the additional details to be added in tax invoice when supply made to an implementing state?
Additional Particulars in the Tax invoice for an supply made in an Implementing state
Where the Supply of Goods or Services are supplied in an Implementing State, the following additional particulars should be included in the tax invoice issued by the taxable person:
- The tax registration number (TRN) of the Recipient of Goods or Services issued to him by the competent authority of the Implementing State in which the supply is treated as taking place.
- A statement identifying the supply as between the State and an Implementing State.
- Any other information specified by the Authority.
- What are exceptions to the issue of the tax invoice – (No tax Invoice):
Taxable person need not be required to issue a tax invoice in the following cases:
- If there are sufficient records available to establish the particulars of supply and the supply is wholly zero- rated supply.
- When the authority considers and determines that there are sufficient records available to establish that based on the particulars of the supply or class of supplies it is impracticable for the taxable person to issue a tax invoice.
- Where a registrant makes a supply of goods or services through the vending machines, not required to issue a tax Invoice – recent decision.
In order to apply this decision, the registrant must keep sufficient records to establish the particulars of the supplies made, which shall contain, as a minimum:
- A description of the goods or services supplied
- The total consideration and the tax amount charged
- The date of supply of the goods or services
The above decision shall be applied from 01st Jan 2018 and it shall not have any effect on the date of supply or the requirement to account for tax on the supply made.
- Highlights of Recent Public Clarification on Tax Invoice:
The following has been clarified clearly by the FTA:
Issuance and Delivery of tax invoice including the simplified tax invoice:
- It is clearly specified that, in all the cases where the taxable supply is made, a tax invoice should be issued and delivered to the recipient.
- In certain cases, Simplified tax invoices are issued. In this case, the ability to issue a simplified tax invoice does not affect the requirement that the tax invoice should be issued and delivered to the recipient.
Therefore in all the cases where a standard rate of supply is made it is a requirement to provide a tax invoice in respect of the supply.
Simplified invoice: Line items to be shown at the gross value:
In the case where the Simplified tax invoices are issued, there is no requirement to show the net value for the line items. In practical terms, this means there is no requirement for the line items to be shown at a net value in the tax invoice. At the bottom of the simplified tax invoice, the total consideration is shown (i.e. the total gross value), with a separate line showing the tax included within that value
|Apples||10.00||This is Inclusive of VAT i.e. gross value of the items line wise presented|
Full tax Invoices: Line items to be shown at net value
In the case where the full tax invoices are issued, line items should show the tax value and net value, it is not mandatory to show gross value.
|Discount||Taxable (AED)||VAT @ 5%||Total (AED)**|
|Taxable total :||345.00|
|Other Charges / Adjustments||0.00|
** This recent clarification clearly clarified that the FTA accepts a full tax invoice does not need to include gross amounts (i.e. inclusive of tax) for each line item, as the total gross amount payable for the Invoice shall be stated.
Therefore it is not mandatory to include the gross amounts (i.e. inclusive of tax) in the invoice, but it is optional as the FTA did not directly mentioned not to include.
- Tax Invoices issued in the foreign currency
Where the tax invoices are raised in the foreign currency, the invoice should state the tax amount converted to AED and the exchange rate used for conversion.
Also it is clearly clarified that business issuing invoices in foreign currencies and which do not display the tax value in AED as mentioned above, are failing to issue a valid tax invoice for VAT purpose.
A separate note to be given for the invoice issued in USD converting it into UAE AED in the format as follows:
|VAT payable in USD||Conversion rate||VAT payable in UAE|
|500 USD||I USD = 3.67 AED||1835.0 AED|