Output VAT Adjustments

Output tax is VAT that is calculated and charged on the sale of goods and services from your VAT registered business.

A special provision is incorporated to UAE VAT law to allow output VAT adjustment if any of the following events occur after the supply of goods and services:

  • Cancellation of supply
  • Changes in the tax treatment of supply due to change in the nature of supply
  • Alteration of consideration paid /payable
  • Return of goods /services in full or in part
  • Error in charging tax on the invoice

If any of the above-mentioned events occur, the output VAT previously calculated requires an adjustment. The tax adjustment can result in an increase or decrease in output VAT.

At the time of sale, if the place of supply was found to be inside the state and later, during the movement of goods, it was found that the supply would finally be treated as being outside the state, such errors are not considered an error in charging tax invoice.

For example, on 25th March 2018, ABC traders, located in Dubai, supplied goods to XYZ for AED 50,000 + VAT AED 2,500. On 5th April 2018, XYZ returned goods worth AED 10,000.

In the above case, ABC traders should make an output VAT adjustment by recording a credit note for the value of AED 10,000 + VAT AED 500. After adjustment, ABC traders output VAT liability will be AED 2,000

Also Read: Recovery Of VAT For Entertainment Expenses Of Employees In UAE

Conditions for adjusting output VAT amount charged in the invoice

The supplier is allowed to adjust the output VAT only when any of the following conditions are met:

  • VAT charged in the invoice is different from the amount of tax chargeable on the invoice

If the output tax amount charged on the supply stated in the VAT invoice should not be taxed on the supply as a result of any of the events discussed above.

  • VAT returns are submitted for the period

VAT returns are submitted for the tax period during which the supply was carried out and the amount was incorrectly calculated as the amount of output tax due to the occurrence of any of the events discussed above.

The output VAT adjustment should be adjusted in the following manner:

If the actual VAT is more than the previously levied VAT, a new tax invoice for an additional amount levied should be issued when such an increase was identified.

This will be applicable in all situations which will lead to an increase in the output VAT like escalation of price, change in the tax treatment, error in charging tax in the invoice, etc.

In case if the actual tax due is less than what was previously levied, a tax credit note should be issued for the differential amount. This will reduce the output tax of the supplier and input tax of the recipient

VAT Adjustment Services

Any taxable person or business can adjust a VAT amount when entering a transaction, or by editing a transaction if it doesn’t have any payments or allocations applied. If you are confused about output VAT adjustments in Dubai, seek guidance from VAT experts in UAE. We take time in understanding every client’s situation and have the flexibility to tailor our services to a particular client’s requirements. Call us for further discussion on VAT recovery

How to Register for VAT?

Taxpayers can take the help of Federal tax authority in UAE for registration of tax in UAE.

Is VAT Mandatory on Goods and Services in UAE?

UAE imposes VAT on tax registered businesses at a rate of 5% on a taxable supply of goods or services at each step of supply chain.

What are the Documents Required for VAT Registration?

  • business trade license
  • passport copies
  • emirates id

Who can Claim VAT Refund in UAE?

Tourists and visitors can claim a refund on VAT paid on purchases they made during their stay in the UAE. recovery of payment will be done through a fully integrated electronic system which connects retailers in the tax refund for tourists’ scheme