TAX Invoice UAE
As per Article 67 of the UAE VAT Law, a taxable person shall issue a Tax Invoice within 14 days of the Date of Supply. Some of the taxable persons are under the impression that they can always make the tax invoice after 14 days from the date of delivery of goods or from the date of providing the service. It is noticed in certain cases if the actual supply of goods or supply of services is done in the first half of a particular month but, invoices are made in the subsequent month. This will result in non-compliance of the UAE VAT Law if they disclose the sale (supply)in the subsequent month.
Let us analyze the case with an example:
ABC LLC (supplier) delivered goods worth AED 200,000/- to EFG LLC (customer) on 22nd June 2018. ABC LLC decided to prepare the Tax Invoice on 05th July 2018 (within 14 days from the Date of Supply).
Assume that the tax period of ABC LLC is from 1st January ’18 to 31st March ’18 and quarterly thereafter. Hence, any supply made in the month of June ’18 has to be reported and paid on or before 28th July 2018.
In this example, ABC LLC is preparing the Tax Invoice on 05th July 2018. They included this invoice along with the supplies made for the period 1st July 2018 to 30th September 2018 and tax was paid on 28th October 2018. Whether the Tax Treatment is correct or not?
Let us identify the applicable provision of the UAE VAT Law to understand the correct Tax Treatment
Applicable provisions of the Law –
- Date of Supply:
Article 25 of the UAE VAT Law, the Date of Supply will be the earliest of the following
- 25 (1) The date on which goods were transferred (if the transfer was under the supervision of the supplier)
- 25 (2) The date on which the customer took the position of goods (if supply was not supervised by the supplier)
- 25 (6) The date on which services were completed
- 25 (7) The date on receipt of payment or the date on which the tax invoice was issued
- Date of Issue of Tax Invoice:
As per Article 67 of the UAE VAT Law, a taxable person shall issue a Tax Invoice within 14 days from the date of supply mentioned under Article 25 above.
Applicability of the provisions of the UAE VAT Law in the current scenario –
From the above, it is understood that the objective of Article 67 is to provide enough time for the customer to prepare a tax invoice in order to ease his administration process. Here, the Article provides the time limit within which the tax invoice has to be prepared by a taxable person.
Though the invoice is prepared on a later date, the Date of Supply of Goods or Services will still remain on the same date of supply as per Article 25. Merely preparing a tax invoice on another date will not shift the date of supply from the actual date to the invoice date.
In the above example, the Date of Supply is on 22nd June 2018. Even though the invoice date is 05th July 2018, the invoice should disclose the date of actual supply as 22nd June 2018 [as per Article 59 (1) (f) of the Executive Regulation of the UAE VAT law Date of Supply should be mentioned in the Tax Invoice if the Date of supply is different from the date of Tax Invoice].
Hence, in this case, ABC LLC should include the supply for the quarter 1st April 2018 to 30th June 2018 and pay the tax amount on or before 28th July 2018 to the Tax Authority. Merely extending the date of invoice by using the provision of Article 67 of the UAE VAT Law cannot help in shifting the Tax Point from one quarter to another quarter. In case any taxable person adopts this practice, it will result in a delay in filing the VAT Return and delay in payment of Tax Liability to the Tax Authority. This will attract penalty as per the provision of the UAE VAT Law.
However, it does not resist ABC LLC to prepare a tax invoice on 05th July 2018. They can prepare the tax invoice on 05th July 2018 with the disclosure of the date of supply as 22nd June 2018. But the taxable supply should be included in the second quarter of 2018 while filing the VAT Return.
What is the eligibility of EFG LLC being the customer to claim Input Credit?
From the above example let us analyze the eligibility of EFG LLC on claiming the Input Credit. For ease of analysis let us assume that EFG LLC also has the same tax period as that of ABC LLC.
Applicable Provisions Related to Eligibility on Claiming Input Credit –
As per Article 55 of the provisions of the UAE VAT Law the taxable person is entitled to recover the Input Tax in the tax period in which he receives and keeps the tax invoice. In case if he fails to claim input tax in the tax period in which he is entitled to claim, he can recover the same in the subsequent period.
In this case, EFG LLC received the Tax Invoice in the month of July 2018. Though the Date of Supply in the invoice is 22nd June 2018 EGC LLC cannot claim the Input Credit in the second quarter of the year (1st April 2018 to 30th June 2018). They can claim only either in the third quarter (1st July 2018 to 30th September 2018) or in the fourth quarter (1st October 2018 to 31st December 2018).
Emirates Chartered Accountants Group offers a wide range of VAT Services all over the different emirates of UAE and in Bahrain. The Tax Department has an in-hand experience of implementing VAT in UAE for more than 500 businesses in the UAE and possess practical experience with the ongoing scenarios for VAT in UAE ranging from public listed companies, banks, corporates & SME’s across the UAE.
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