Know About Tax Credit Notes to Stay on the Right Side of UAE VAT Law
The UAE VAT Decree-Law No (8) of 2017 defines a Tax Credit Note as a “written or electronic document in which the occurrence of any amendment to a Taxable Supply that reduces or cancels the same is recorded and the details pertaining to it”. As per the Law, a VAT-registrant is required to issue an original Tax Credit Note when a reduction in Output Tax happens in relation to any supply made by the registrant.
A Tax Credit Note, in essence, is an amendment to the Tax Invoice issued previously due to the amendments in the taxable supply for which Tax invoice was raised, giving way to a drop or cancellation in the value of such a taxable supply. A tax credit note is normally issued by the supplier, for example, when a customer returns an item due to some faults. In such cases, the supplier has to issue the Tax Credit Note to reduce the output tax payable by reference to the amount of the refund.
The taxable businesses should be aware of what a Tax Credit Note should include and when to issue a Tax Credit Note for which this article will serve as a quick guide. For further guidance on the issuance of Tax Credit Notes, consult with the best tax consultants in Dubai, UAE.
What Should a Tax Credit Note Contain?
The Executive Regulation of the UAE VAT Decree-Law No (8) of 2017 states that the Tax Credit notes should contain the following particulars.
- The words ‘Tax Credit Note’ should be clearly written on the invoice
- A Tax Credit Note should contain the name, address, Tax Registration Number (TRN) of the Tax registrant who makes supply
- Name, address, and TRN of the Recipient
- The issuance date of the tax Credit Note
- Details such as the value of supply as per the Tax Invoice, the exact amount of the supply’s value, the difference between the two values, and the tax charged in relation to that difference in AED
- A brief note explaining the circumstances that caused the issuance of the Tax Credit Note
- Adequate information to identify the supply to which the Tax Credit Note is related
Is It Compulsory to Issue A Tax Credit Note?
If the reduction or cancellation of a taxable supply is impacting the Tax Invoice issued earlier, the VAT registrants are mandated to issue a Tax Credit Note to cancel out the VAT that has been charged. However, the FTA may decide against the issuance of a Tax Credit Note under certain circumstances.
If the VAT registrant is able to demonstrate adequate records to verify the particulars of any supply and prove that it is impractical to issue a Tax Credit Note, then the FTA will issue any of the following decisions:
- Exception from mentioning any one or more particulars that a Tax Credit Note is normally required to contain
- The taxable person is not required to issue a Tax Credit Note
Can a Recipient of Goods or Services Issue a Tax Credit Note?’
In normal conditions, a supplier is the one who issues the Tax Credit Note. However, a recipient can also raise a Tax Credit Note as per the Executive Regulation of the UAE VAT Decree-Law No (8) of 2017. The following are the conditions by which a recipient can raise the Tax Credit note:
- The recipient of the Goods or Services is a VAT Registrant in the UAE
- The supplier and the recipient agree that the supplier won’t issue a Tax Credit Note
- The Tax Credit Note should contain all the required particulars
- The words ‘Tax Credit Note created by buyer’ should be displayed clearly on the Tax Credit Note
Conditions for Raising Electronic Tax Credit Note
As per Article 60 of the Executive Regulation of the UAE VAT Decree-Law No (8) of 2017, a taxable person can issue a Tax Credit Note electronically if
- The Taxable person is able to securely keep the copy of the electronic Tax Credit Note in compliance with the UAE VAT Law
- The Taxable person can guarantee the authenticity of origin and content of the electronic Tax Credit Note
The tax registrants are required to adhere to the conditions specified in the UAE VAT Law while raising the Tax Credit Note. To clear the air about the requirements of issuing a Tax Credit Note, consult with the best tax consultants in Dubai, UAE.
Seek the Advice of Best Tax Consultants in Dubai, UAE
Taxable persons as per VAT in UAE are required to consider the Tax Credit Note with adequate attention in a bid to ensure compliance with the FTA regulations. Suppliers registered for VAT in UAE are required to ensure that the Tax Credit Note they issued is complete with all the mandatory particulars. To ensure that they are complying with the UAE VAT, the registered suppliers and VAT registrant recipients need to seek the expert advice of the best Tax consultants in Dubai such as Jitendra Chartered Accountants (JCA). JCA has a team of highly qualified tax agents in Dubai who are passionate about providing assistance to taxable persons at any time. JCA’s tax agents in Dubai ensure that the businesses are complying with the UAE VAT Law and the regulations implemented by the FTA.