New Changes to VAT Law Regarding Tax Credit Notes in the UAE

As per the UAE VAT Law, a tax registrant is required to issue a Tax Credit Note when a reduction of Output Tax occurs in connection with any supply made by the registrant and deliver the same to the recipient of goods or services. A tax credit note is a written or electronic document to be recorded and issued by a registered supplier of goods or services under the circumstances stated in the UAE VAT Decree-Law and its executive regulations. However, the new amendments to the UAE VAT Law have introduced certain changes to the provisions of issuing a tax credit note in the UAE.

VAT Consultants in the UAE can advise you on how to incorporate the new amendments into your VAT strategy. In this blog, we will discuss the new changes concerning the issuance of tax credits in the UAE along with the conditions and requirements of issuing the same. Read ahead for valuable insights:

What’s the New Change in the UAE VAT Law about Tax Credit Notes?

The UAE has amended Article 62 (2) of the VAT Law  so that if the VAT calculated on a supply exceeds the amount that should have been charged, a tax credit note must be issued within 14 days of the date any of the following occur:

  1. The cancellation of the supply occurred
  2. Due to a change in the nature of the supply, the VAT treatment of the supply has changed
  3. There is an amendment in the previously agreed consideration for the supply
  4. The recipient returned the goods or services to the supplier and got a refund; or
  5. If VAT was charged in error or an incorrect tax treatment was applied (You should note that the requirement to issue a tax credit note where there is an incorrect tax treatment is a new addition in the amended UAE VAT Law)

What Would Be the Impact of the New Amendment?

The time limit of 14 days for issuing a tax credit note in the UAE is a new addition to the VAT Law. In line with this amendment, businesses need to ensure they have appropriate systems in place to correctly identify cases where a tax credit note needs to be issued. You must also update the systems to make sure that if an incorrect tax treatment was applied (e.g., incorrectly applying a standard VAT rate), a tax credit note must be issued. Tax agents in Dubai can help you assess the impact of the new amendments on your business.

When Did the New Amendment Take Effect?

The new amendments to the UAE VAT Law have taken effect from January 1st 2023. It means the businesses need to ensure full compliance with the amendments now. Availing of the best VAT consulting services in Dubai will stop you from committing compliance failures.

What Details Need to Be Included in a Tax Credit Note?

As per the executive regulations of the UAE VAT Law, you must include certain mandatory information on a tax credit note. VAT consultants in Dubai can help you eliminate the uncertainties regarding the details to be included in a tax credit note. A tax credit note in the UAE must include the following details:

  • Clearly displayed words: “Tax Credit Note”
  • The name, address, and Tax Registration Number  (TRN) of the Registrant making the supply
  • The name, address, and TRN of the Recipient where the recipient is a registrant
  • The date of issuance of the Tax Credit Note.
  • The value of the supply shown on the Tax Invoice, the correct amount of the
  • The value of the supply, the difference between those two amounts, and the Tax charged that relates to that difference in AED.
  • A brief explanation of the circumstances giving rise to the issuing of the Tax Credit Note
  • Information sufficient to identify the supply to which the Tax Credit Note relates

 Consult with the Best VAT Consultants in Dubai, UAE

Businesses in the UAE need to consider the new time limit as per the VAT amendment while issuing tax credit notes. Ignoring the VAT compliance requirements in the UAE will lead to penalties. However, the best VAT consultants in Dubai such as Jitendra Chartered Accountants (JCA) can help you ensure full compliance with the law. We are one of the leading providers of VAT consulting services in Dubai and we have served thousands of satisfied clients. JCA has an FTA-approved tax agent in the UAE who can represent you before the Federal Tax Authority (FTA) in case of any dispute or penalty. Consult with JCA today to ensure complete VAT compliance in the UAE without any hassle.