Tax credit note under UAE VAT law means the the document which records any amendment to the taxable supplies, whether by reduction (in the case of giving a discount) or cancellation (In the case of sales returns), along with a statement of the details regarding this amendment.
In the following article, we will breakdown tax credit note under UAE VAT law and explain all the issues related to submitting a VAT credit note in UAE, the conditions that must be met to complete the output tax settlement process, and other relevant provisions.
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Tax Credit Note under UAE VAT Law Format
Cabinet Resolution (52) of 2017 specified the format of tax credit note under UAE VAT law as following:
- Must contain “tax credit note” clearly in the tax invoice.
- Name and address of the VAT registrant (making the supply) and his tax registration number (TRN).
- Name and address of the recipient, in addition to his tax registration number if he is registered for tax.
- The date on which the tax credit note was issued.
- Clarifying the value of the supply on the tax invoice, the correct value of the supply, the difference in the amount between the two imported supply values, and the tax imposed in dirhams on the difference between them.
- A brief explanation that includes the reasons that led to the issuance of the tax credit note.
- Sufficient information about the taxable supply that was modified, reduced or eliminated that led to the issuance of this notice.
Tax Credit Note Issuance Cases
- In the case that the tax to be imposed on the supply exceeds the tax that was calculated by the registrar, in such a case, for the purposes of settling the output tax, a new tax invoice must be issued and the additional value of the due tax calculated during the period in which the increase was discovered.
- If the output tax calculated by the supplier exceeds the tax required to be imposed on the supply.
- When there is a reduction in the tax due to the tax calculated by the supplier exceeding the tax to be imposed on the supply.
- If the registrant makes a nominal supply, the registrant must issue an original copy of the tax credit note in the event of a reduction in the output tax on this supply.
- If the supplied services/goods cancelled.
- If the tax treatment of the supply is changed due to a change in the nature of the supply.
- If the previously agreed upon supply consideration is modified for any reason.
- In the case that the recipient of the services or goods returns them to the registrar partially or completely and the consideration is returned partially or completely to him.
- If the tax is imposed or the tax treatment is applied incorrectly.
Please Note: A person subject to VAT can issue a tax credit note via electronic means, according to the following conditions:
- VAT registrant must have the ability to store a copy of the E-invoice in a way that achieves its security and in accordance with adequate requirements for record keeping.
- Ensuring the accuracy of the content of the tax credit note and its source.
Is Issuance of A Tax Credit Note Mandatory?
The obligation to submit a tax credit note is related to the situation related to the insufficiency of the current and future records of the tax registrant to prove data related to any supply or category of supplies. However, if there are sufficient records, it is impractical to request the issuance of a tax credit note by the taxable person, as the Authority can The Federal Tax Authority may decide any of the following, taking into account the necessary conditions for that:
- No need to file a tax credit note.
- Failure to stipulate any one or more of the data that must be provided in the notice.
Can a Tax Credit note be Issued on Behalf of the Registered Supplier?
This is possible if the recipient agrees to issue such a notice on behalf of the registered supplier regarding the supply of goods or services, provided that the notice issued in this case is treated as if it was issued by the supplier according to the following:
- The recipient must be registered for VAT.
- That there is an agreement between the supplier and the recipient that the former will not issue any tax credit note in relation to the agreed supplies.
- Tax credit notice must include the information stipulated among the things that must be provided in the notice.
- The buyer must write the phrase (the tax credit note was prepared by the buyer) clearly on the notice.
Therefore, the tax credit note issued by the supplier will not be considered a tax credit note if it is issued by him in any of the circumstances indicated above.
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