In the previous article on invoices under UAE VAT, we learned about tax invoices and simplified tax invoices. These are the documents that the registrant should issue when providing taxable goods or services. In this article, let us understand another important document issued under the VAT-Tax Credit Note.
The impact of GCC value-added tax on invoices
In the value-added tax system, all transactions must comply with tax regulations. This means that invoices, debit notes, credit notes and other documents must be printed in the format prescribed by the Federal Trade Administration (UAE) and Zakat Revenue Authority (Saudi Arabia), depending on where your business is located.
What are tax credits?
A tax credit notice is a written or electronic document that is recorded and issued by a registered supplier of goods or services to record the following events:
a. Recipient returned or found insufficient supply
b. Supply value decline
C. Tax value decline
Example:’On February 2, 2018, Jehan & Co., a registrant in Abu Dhabi, provided 10 monitors at AED5,000 each to Noor Electronics, a registrant in Abu Dhabi. The value-added tax on the supply is AED 2,500. On the same day, Noor Electronics returned 1 monitor to Jehan & Co. because it was damaged in transit. In this case, Jehan & Co should issue a credit notice to Noor Electronics requesting the return of the display and offsetting the value added tax on the display. The tax credit vouchers that Jehan & Co. will issue are as follows.
Tax credit form
The following is an example format of tax credit voucher under UAE VAT:
Tax credit description
Impact of tax credit statement
The tax credit notice issued by the registered supplier will have two effects:
1. Reduce taxes payable by suppliers
2. Reduce the input tax that the consignee can make up
Electronic Tax Credit Form
Taxpayers can issue tax credit notes electronically, but the premise is:
a. According to record keeping requirements, the taxable person must be able to safely store a copy of the electronic tax credit
b. The authenticity and integrity of the source of the electronic tax credit should be guaranteed.
Therefore, those who register under the value-added tax in the UAE should pay attention to tax credit vouchers, which are documents to be issued under the above-mentioned circumstances. The registered supplier shall ensure that the issued tax credit notes are complete and contain all required mandatory details. If electronic tax credits are issued, the requirements for issuing electronic tax credits must be met. The tax credit notice is also very important for registered suppliers, because the tax credit method will reduce the corresponding input tax on supplies.