The UAE Federal Tax Authority (“FTA”) recently published further clarification on the mandatory contents of tax invoices. The clarification reiterated that a tax invoice must be issued and delivered to customers in all instances where a supply taxable at 5% is made. Delivery of the invoice has been reiterated as a key requirement – offering to print or deliver the tax invoice on request is not sufficient to comply with the VAT legislation.
The clarification explained that simplified tax invoices can be issued where the customer (i.e. recipient of goods or services) is not VAT registered or the value of consideration does not exceed AED10,000. The FTA requires the following line items to be stated on a simplified invoice in order for it to be valid:
- The words ‘Tax Invoice’;
- The name, address and Tax Registration Number (“TRN”) of the supplier;
- Date of invoice;
- Description of goods and services;
- Total consideration and VAT amount;
If the simplified invoice covers a number of goods and services, there is no requirement to break down the VAT due per line item.
The clarification also addressed some of the contents of full tax invoices. As per the UAE VAT Executive Regulations published in 2017, a tax invoice must include the following information:
- The words ‘Tax Invoice’;
- The name, address, and the TRN of the supplier;
- The name, address and the TRN of the customer;
- A sequential invoice number;
- Date of issue of the invoice;
- Date of the supply, if different from the date of the invoice;
- A description of goods and services supplied;
- For each good or service, the unit price, the quantity or volume supplied, the rate of tax and the amount payable in AED;
- The amount of discount offered, if applicable;
- The gross amount payable in AED;
- The tax amount payable in AED, along with the exchange rate where the invoiced amount is converted from other currency to AED;
- Where the invoice relates to a supply under which the recipient of goods and/or services is required to self-account for VAT, a statement explaining the requirement along with reference to the relevant provision in the law;
The recent FTA notice reiterated that full tax invoices must show the following information per line item:
- Unit price
- Volume/quantity supplied
- Rate of tax
- Amount payable in AED
Therefore, full tax invoices must show the net amount, VAT amount and gross amount charged per line item. Additionally, where firms issue their invoices in foreign currencies, the tax amount must be expressed in AED and the invoice should state the exchange rate used (as per the Central Bank’s published rates).
Finally, due amounts should be rounded to the nearest Fils following mathematical principles. For example, AED8.657 should be stated on the invoice as AED8.66 whereas AED2.223 should be rounded to AED2.22.
Failure to comply with the FTA’s guidance will render tax invoices invalid and could lead to significant penalties (up to AED 5,000 per invoice). It is therefore crucial to review the existing invoice templates and ensure that they comply with the public clarification note.
Global Tax Services is an FTA-registered tax agent with extensive VAT and International Tax experience, including impact assessments, VAT training and assisting businesses with compliance obligations. We work with our clients to ensure their tax affairs are efficient and effective, and advise businesses on their VAT compliance obligations.