What is VAT Invoice in UAE

What is VAT?

It is a form of tax that is charged on the domestic consumption of goods and services except for that   are zero rated such as food, medicines etc and on the goods and services that are classified as “Exempted” broadly on exports. The tax is levied at every stage from procurement of raw material, production and till distribution chain that is up to sales. What is VAT Invoice in UAE is explained below.

Impact Of VAT in UAE:

VAT has come  in effect to all business transactions from January 1^st 2018.It will be a positive reaction for UAE as it will generate revenues for development of infrastructure and economic growth of the country. It is estimated that with the introduction of the new form of taxation “Value Added Tax” the economy may raise its annual revenues by Dh 12 billion in the first year of implementation of the VAT system. Gulf Cooperation Council (GCC) decided upon the implementation of VAT system as being one of the steps to diversify revenues due to the fall in oil prices. Tax reform was top priority in UAE succumb to the fall in oil prices and revenues. This fall in oil prices also affected real estate industry impacting the economic growth of the country. How to prepare VAT invoices in UAE should be a priority to UAE companies.

Standard VAT rate of 5% will apply to goods and services unless specifically declared as zero rated or exempted. Sectors specified below will be decided by each member state to be declared as either zero rated or exempt from VAT in their local laws;

• Education;
• Healthcare;
• Real Estate;
• Local Transport.

VAT treatment for following special sectors will be decided individually by each member state and in case not specified otherwise, standard rate will apply;

-Food products falling under the unified list (e.g. basic foods: bread, milk etc.) can be declared zero rated by the member states.
-Medical supplies (equipment and medicines) will attract zero rate at the discretion of each member state.
-Oil and gas sector including oil derivatives can be declared zero rated by individual member states under conditions laid thereon.
-Transport of goods and passengers (intra-GCC and internationally) will be subject to zero rate of VAT.
-Export of goods to jurisdictions outside GCC will be zero rated.
-Financial services’ VAT treatment is left at the discretion of each member state. Revenue from financial services (margin based income e.g. interest and premium etc.) will be declared exempt from VAT as a general rule, however this exemption may not apply to fee based services offered by the financial institutions as defined in the local laws of the member states.
-Free zones’ VAT treatment will be subject to respective laws of member states as they have right to choose their own VAT treatment.

What is VAT Invoice in UAE?

A Value-Added Tax (VAT) invoice is a document issued by an accountable person setting out the details of a taxable supply and all related information as prescribed by VAT law.A VAT receipt will be provided by VAT registered suppliers to the customer. It will show details of the sale including the tax date, the suppliers VAT registration number and the amount paid for the goods or services. Most importantly, it will show the amount of VAT that the supplier has charged the customer. A VAT receipt can be in either paper or electronic format.

A VAT invoice must issue within fifteen days of the end of the month in which goods or services are supplied.

 Why do you need a Tax Invoice- What is VAT Invoice in UAE?

A VAT invoice is tracking tool to know VAT taxes is paid on the taxable goods and services. In the production chain, the seller extends an invoice to the buyer. The invoice contains the necessary information on the amount and percentage of the VAT tax that the buyer pays the seller. The buyer in turn does the same thing when it sells its product down the line to its buyer. In this way, a record of the value added tax follows the product as each business adds value and then sells the product.

VAT invoices help determine the amount of VAT paid by registered business owners. Businesses typically must register for VAT if they meet certain requirements, such as sales above a specific amount. VAT invoices include both parties’ registration numbers, and business owners must issue the VAT invoice after every sale or purchase. VAT invoices also help the government enforce taxation by allowing the government to track sales activities. If the system is handled properly, registered business owners may get tax refunds, and businesses can use VAT invoices to claim credits for VAT payments.

To claim input tax credit for VAT on the purchases that you’ve acquired for your business you need to have a valid VAT invoice as proof of the purchase and that you’ve paid VAT on that purchase. If you don’t have a valid VAT invoice you cannot claim the VAT refund.

What are the requirements of a VAT Invoice ?

A valid VAT invoice should include all of the following details:

• A unique invoice number
• The seller’s name or trading name and address
• The seller’s VAT registration number
• The invoice date
• The tax date (the date of supply which is also known as tax point – if different from the invoice date)
• Customer’s name or trading name and address
• A description of the goods or services supplied to you
• the amount(s) being charged. 

Procedure- What is VAT Invoice in UAE?

VAT Invoices should be maintained for every businesses in the UAE as per the latest information by the Federal Tax Authority (FTA).

Tax Invoice is the essential document to be issued by a registrant when a taxable supply of goods or services is made.According to the  FTA, there will be two kinds of inovices for VAT in the UAE. Supply for less than the specified amount will be considered to maintain a simplified VAT invoice – specifically for supermarkets and retail industry. However, supply for more than the specified amount will have to make a detailed invoice.Under VAT in UAE, a Tax Invoice is to be issued by all registrants for taxable supplies to other registrants, where the consideration for the supplies exceeds AED 10,000. Hence, 2 conditions to be met for issuing a Tax Invoice are:

1.The recipient should be registered and

2.The consideration for the supplies should exceed AED 10,000.

What is VAT Invoice in UAE?-Simplified VAT invoice for supply less than AED 10,000 should consider the below:

• “tax invoice” in a prominent place
• Name, address & TRN of supplier
• Date of issue
• Description of goods or services
• Total amount payable
• Total VAT chargeable

What is VAT Invoice in UAE- The VAT invoice for supplies above AED 10,000 should consider the below:

• “tax invoice” in a prominent place
• Name, address & TRN of supplier
• Name, address & TRN of recipient (where they are a registrant)
• A sequential or unique identifying number
• Date of issue
• Date of supply if different to the date of issue
• Description of goods or services
• Unit price, quantity or volume supplied, rate of tax and amount payable in AED
• Value of any discount offered
• Gross value payable in AED
• Tax amount payable in AED
• Statement relating to reverse charge if applicable

A tax invoice for which tax payment has been deferred for future date , a statement that the recipient is required to account for tax, under Article 48 of the VAT Law should be given in the Tax Invoice

Issuance of Tax Invoice- What is VAT Invoice in UAE?

The Taxable Person may issue a Tax Invoice by electronic means provided that;

1. The Taxable Person must be capable of securely storing a copy of the electronic Tax Invoice in compliance with the record keeping requirements
2. The authenticity of origin and integrity of content of the electronic Tax Invoice should be guaranteed.

Is issuance of Tax Invoice under UAE VAT a must?

It should be noted that in certain circumstance where the Federal Tax Authority of UAE  considers that there are or will be sufficient records available to establish the particulars of any supply or class of supplies, and that it would be impractical to require that a Tax Invoice be issued by a taxable person
FTA may determine that, subject to any conditions that the FTA may consider necessary

1. Any of the particulars specified in in relation to Tax Invoice and Simplified Tax Invoice shall not be contained on a Tax Invoice.
2. A Tax Invoice is not required to be issued in certain cases.

Recipient of Goods and Services issuing Tax Invoice under UAE VAT

It should be noted under certain conditions and circumstances the recipient of good and service could issue tax invoice and Where a Recipient agrees to raise a Tax Invoice on behalf of a Registrant Supplier in respect of a supply of Goods or Services, that document shall be treated as if it had been issued by the supplier if the following conditions are to be met with;

1. The Recipient of the Goods or Services is a Registrant
2. The supplier and the Recipient agree in writing that the supplier shall not issue a Tax Invoice in respect of any supply to which this Clause applies
3. The Tax Invoice shall contain the particulars required under law for Tax Invoice.
4. The words “Tax Invoice raised by buyer” are clearly displayed on the Tax Invoice

When a  Tax Invoice is issued as above the any invoice issued by the Supplier in respect of that supply shall be deemed not to be a Tax Invoice.

Issue of Tax Invoice by an Agent: Where an agent who is a Registrant makes a supply of Goods and Services for and on behalf of the principal of that agent, that agent may issue a Tax Invoice in relation to that supply as if that agent had made the supply, and provided that the principal shall not issue a Tax Invoice.

When the Tax Invoice relates to a supply for which the recipient should pay tax, a statement that the recipient is required to account for tax, under Article 48 of the VAT Law should be given in the Tax Invoice.

Foreign currency on a Value Added Tax  invoice

If the credit contains a foreign currency, it must contain the corresponding figures in AED. The selling rate recorded at the time when the invoice is due to be issued.

Transitional Rules – Early invoicing or payment

Where an invoice is issued or payment is received prior to the date the VAT Law comes in to effect, the value of the payment/invoice will be subject to VAT where the following takes place after the date the VAT Law comes in to effect:

Transfer of goods under the supplier’s supervision

Goods are placed in the possession of the recipient of the goods

• Completion of assembly of the goods
• A customs statement is issued
• The customer accepts the supply of goods

The rules above are intended to avoid invoices being issued or payments being made prior to the effective date of the VAT law for supplies of goods which effectively take place after the effective date of the VAT law, for the purpose of avoiding tax.

How to correct a previously issued VAT Invoice- What is VAT Invoice in UAE?

Once an invoice has been raised it is considered a legal document and cannot be altered.

You can make changes to your invoice if the Value-Added Tax (VAT) amount or the VAT rate is subsequently found to be incorrect.

Incorrect price on the invoice

If you increase the price on the original invoice, you must issue a supplementary invoice which shows:

• the increase in the price (VAT exclusive)
• the rates of VAT applying
• the amount of VAT appropriate to each rate
• a cross reference to other invoices issued in relation to that supply.

If you reduce the price on the original invoice, you must issue a credit note to your customer.

Incorrect rate of VAT on the invoice

If your VAT invoice shows a greater amount of VAT than is correct, you are still liable for the VAT shown on the invoice. In order to correct the matter, you must issue a credit note and a revised invoice.

If your VAT invoice shows a lower amount of VAT than is correct, you must issue a credit note for the full value of the invoice and then issue a revised invoice showing the correct VAT.

If it is discovered that an invoice is incorrect, the procedure is to request that a credit note be raised for the same amount as the incorrect invoice and then requesting that a new corrected invoice be raised.

A credit note should only be requested in one of the following circumstances:
1. Information is missing from the original invoice
2. Information is incorrect on the original invoice
3. The goods/service never took place

Buyer created Invoice arrangements

In some industries where the supply of a material is guaranteed between two parties but the exact volume is uncertain Buyer-created tax invoices can be used. This means that the recipient of the materials determines the value of the materials, and the cost of the materials for the supplier.

There are conditions for the use of Buyer-created tax invoices, and more importantly a relationship of trust and goodwill between the parties. Here is what you need to know:

Conditions of a buyer-created invoice

A buyer-created invoice can be issued if both the supplier and the recipient:

• are VAT-registered persons
• have agreed that only the recipient will supply the invoice
• keep a copy of the invoice
• approval granted by the FTA to invoice in this manner, applied for and granted in writing

Need to upgrade to Reach online VAT Accounting Software :

All the registered businesses under VAT in UAE, will be dealing with supplies for which Tax Invoice is to be issued. As per FTA all the requisite of a Tax Invoice issued by registrants has been prescribed in the VAT law , it is essential that all invoices issued under the VAT regime meet these requirements. If Tax Invoices issued do not contain the required information, it could lead to an Administrative Penalty. In this regard, it would be useful for all businesses to use a software which would automatically pick the details required in a Tax Invoice, notify the user if any mandatory details are not given in the Tax Invoice, generate the Tax Invoice quickly and most importantly, keep updated about all the details that are required to be given in a Tax Invoice. Ensuring that Tax Invoices are issued correctly by suppliers is also important for the recipient of the supply. The Tax Invoice serves as the basis on which the recipient can claim input tax deduction on the supply. Hence, businesses should take measures to ensure that Tax Invoices issued under VAT are accurate and complete.

 Reach Accountant software is well designed to match all the needs for successful running of the business. The software can be used in different industries ,traders ,manufacturers, retailers,  workshop ,business projects etc. It is an accounting software that can automatically manage your book of accounts, taxes, inventory, sales, purchases and more online quickly and securely

Top Features of the Reach Online VAT Accounting Software are:

• Accounting Management: All functions relating to accounts are inbuilt with the software. You can manage your Accounting Ledgers, Bank & Cash Operations, Purchase & Sales Estimates, Warehouse Allocations, Expense Recording, Expense Grouping, Payments – Part or Full, Journal Entries, Income and loss a/c, Balance sheets, Receipts – Part or Full, Contra Entries, Financial Reports, Day book.

• Tax Management: Our accounting Software automatically calculates the taxes relevant for every bill created. The Software is designed as per the government norms for calculation of VAT. It also has the option to add any number of taxes relevant to the business. In case of change in tax percentages a change it in the software on your own. All you have to do is add your tax percentage and our software will calculate the taxes automatically. This multiple tax scheme can also be applied to multiple products on a single purchase.

• Income Management: The Company can create Quotations then the same can be converted as a Sales order or Pro-forma invoice or Invoice. From Invoice you can create Receipts as well. Accountants will be able to know what payments have been received and what are pending in the reports. You can also set reminders for receiving payments.

• Expense Management: You can create Purchase Orders then the same can be converted as bill or payments. You can also create Debit notes for purchase returns. Accountants will be able to know which purchase bills have been paid and which are pending in the reports. You can also set reminders for making payments.
• Invoicing: Generates VAT compliant invoice of the company in the specified design as requested by the client or can choose from the available templates in the software. It also converts quotes to invoice .One of the features is the software can convert the Foreign currency invoices to base currency and further calculating the VAT at UAE standard rate.

·         Print Tax Invoice In Arabic: Reach software lets you print invoices in Arabic, English or both, as per the mandated guidelines of GAZT and FTA.

• Auditor View: Full-fledged Financial reports, Tax reports VAT reports, read process by auditor, with e-filing options, PF & ESI Reports, Tax Consulting Modules are some to be named.
• Check Post for VAT returns: As the software has been designed exclusively to aid individuals and entities to be VAT compliant in UAE, the set of rules and regulation laid by FTA (Federal Tax Authority) of UAE are embedded in the software. Hence any process error will be popped up by the application can be viewed .For instance wrong Tax Registration Number, incorrect taxable figure, wrong taxation period.
• Automatic Update on Tax legal Sections: As the Reach software are cloud computed software gets upgraded to update any revised tax laws and section if any in future.
• Computation Of VAT Returns: The software is inbuilt with all the detailed crucial information  on tax computation Tax Assesee can  fetch all the details of all the taxable transactions It lists down transactions which are included and excluded in the VAT return  calculate input tax, reverse charge and output tax to avail claim if any 

• Filing Of VAT Returns: The registered businesses in UAE are required to generate the VAT return File from their accounting software, login to the FTA’s e-tax portal and upload the return file. On the basis of the uploaded return file, the e-tax portal will validate the file and accordingly the details from the file will be auto-populated in the online return form. Reach VAT software is designed to ease the process of filing returns and comes under the purview of FTA prescribed set of rules and regulations.

• VAT Reports etc.
• Calculate VAT automatically.
• VAT support in Sales, Purchase, Sales and Purchase returns, Journal entries.
• Generate Federal Tax Authority compatible tax reports.
• VAT Paid (charged by suppliers) and Vat Collection (Charged to customers) Analysis.
• Transaction wise details of VAT paid and VAT collected.
• Attach every Vendors/Customers VAT number and other details.
• VAT supported for Goods (stocked) and Service (non-stocked) items.
• Online application accounting.
• VAT Account Reconciliation, VAT Collection & VAT Paid analysis report.
• Report export to excel and other standard formats.
• VAT returns statement compatible with Federal Tax Authority standards.

Online accounting VAT software enables you to file vat returns, manage accounts and other business operations from any geographical area be it at the comfort of the house.

• Receipt: Receipts can either be manually entered or imported it in excel format easily.
• Payments: Payments can either be manually entered or imported it in excel format easily.
• Multi Company: Manage business through comfort of the smart phone.
• Tally Import: Tally files can be easily imported to Reach Software of various periods and manage business easily.
• Auditor’s Report: Full Financial Report are available,Read process by Auditor,Tax Reports,VAT Report with e-filing options,PF & ESI Reports,Tax Consulting Modules are some featuress mentioned.
• Mobile Application: Access business information through tabs and android smart phones, pick photos of expense vouchers and attach to expenses, daily profitability and other key reports can be viewed on phone.
• Bank Synchronization: Bank Statements can be imported in to Reach software through excel files.
• Security: There is complete security of data stored in the hard disk. Data can be accessed and control by creating access restriction. One time password facilities also ensures a check in the log in to the website.

• Run Business from anywhere: The business can be run access data from anywhere at your comfort. Just like checking mails from the laptop or systems.

• Free and Automatic Upgrades: At Reach Accountant you will be provided free services of upgrading the software frequently with new features and use it absolutely free.

• No investment in expensive hardware: The software is browser based. It just requires internet connection which can be connected to multi computers without using LAN and servers.

• API: The client can integrate the existing software with Reach accounting application ,

• Automatic Data Backup: Reach stores all the data in servers offsite with regular backups. Hence business information is safe and secure

·         User Interface & Complexity:The software is designed to make its use friendly and easy,no cumbersome process to operate the application and software.

• Scalability:It is an VAT accounting software which can scale with your business needs. . Some software companies offer only one version of the product and some have progressive versions depending the business type or size. Reach Accounting software offers both integrated an entry level version as well as a feature rich version which you might not need for the current business processing but will definitely need in future for business development.

Top Two Features of the Reach Accounting Software

• Outsourced Accounting: The software enables to finish the outsourced accounts in less than 30 minutes.

• Real Time Accounting: Allows client to record sales and purchases online, while finalizing accounts that is checking the Audit trail, providing MIS reports, checking Tax reports, printing financial reports and filing taxes.

Technology Used

Reach has implemented the latest technology Cloud Computing to handle  day to day business transactions just  a click away from your browser from any part of the world.

Cloud Computing is a concept through which organizations can manage their data centres, processes and applications online via internet on the scheme of pay for use basis. Many of today’s small businesses find great advantages when adopting a virtual office environment. Rather than maintaining one centralized business location, employees are given the opportunity to work from home and connect via computer. Virtual offices can stretch across the country, or even exist within a small geographic area while still providing benefits to both employees and employers. Yet certain business functions need to be managed differently in a virtual environment. When it comes to accounting, a cloud system can improve virtual office management, especially for tasks such as expense tracking and financial report consolidation.