Everything you must know about tax invoicing in the UAE
Invoices and financials records of must be maintained by every type of businesses in the UAE. As per the Federal Tax Authority (FTA), UAE tax invoices need to be in accordance to the Federal Law.
The law governing under the article 59 of Cabinet decision no 52 of 2017 on executive regulations of the Federal Decree Law No 8 on Value Added Tax (VAT Decree Law), states that a UAE tax invoice must contains the following:
- It should be headed as “Tax Invoice’’
- Name, address and Tax Registration Number (TRN) of the supplier
- Name, address or mailing address and TRN of the recipient
- A sequential Tax Invoice number or a unique number
- Tax Invoice issuance date
- The date of supply if the invoice is issued on date different from the date of supply
- Details of good and services. It should have unit price, the quantity supplied, the rate of Tax and the amount payable expressed in AED.
- Discount must be separately disclosed.
- Gross amount should be mentioned in AED
- If invoice is related to transaction, where recipient is required to account tax, it should be clearly stated.
- In case of profit margin scheme transaction, the supplier must mention in the tax invoice that the invoice is related to profit margin scheme.
Tax Invoice can be issued in electronic form if authenticity of origin and integrity of invoice is guaranteed and taxable person is capable of keeping records or electronic invoice.
Many times, it is not practical to issue complete Tax invoice with all the required specifications, in such case simplified invoice can be issued if below criteria is fulfilled:
- Where recipient is non-registered for VAT or
- Consideration is less than AED 10,000 then simplified invoice can be issued.
Simplified invoice should be headed as Tax invoice. It should have the date of tax invoice issuance, consideration and tax amount, Name address and TRN of supplier.
Tax invoice should be raised within fourteen days of rendering of services.
As per Law amounts in the tax invoice should be mentioned in AED. In case invoice amount is in other currency it should also state the corresponding amount converted into AED using exchange rate of central bank of UAE.
Penalties on non-issuance of tax invoices in the UAE
It is extremely mandatary to issue a tax invoice within 14 days from the date of supply as defined in the article 67 of VAT Decree Law. Non issuance of tax invoice or failure of issuance of correct VAT invoice within specified time may attract penalty.
As per the Cabinet Resolution no 40 of 2017 on administrative penalties for violations of Tax Laws in the UAE, below are the summaries penalties. Issuance of incorrect VAT invoice will lead to incorrect tax VAT return reporting.
Penalty for failure by the Taxable Person to issue the Tax invoice or an alternative document when making any supply.
AED 5,000 for each tax invoice or alternative document.
Failure by the Taxable Person to comply with the conditions and procedures regarding the issuance of electronic Tax Invoices and electronic Tax Credit Notes
AED 5,000 for each incorrect document.
Penalty for submittal of an incorrect Tax Return by the Registrant.
Two penalties are applied:
Fixed penalty of:
- AED 3,000 for the first time.
- AED 5,000 in case of repetition
Percentage based penalty shall be applied on the amount unpaid to the Authority due to the error and resulting in a tax benefit as follows:
- (50%) if the Registrant does not make a voluntary disclosure or he made the voluntary disclosure after being notified of the tax audit and the Authority has started the tax audit process, or after being asked for information relating to the tax audit, whichever takes place first.
- (30%) if the Registrant makes the voluntary disclosure after being notified of the tax audit and before the Authority starts the tax audit.
- (5%) if the Registrant makes a voluntary disclosure before being notified of the tax audit by the Authority.