What is a Tax Credit Note?

The UAE VAT Law defines the same as below

“A written or electronic document in which the occurrence of any amendment to a Taxable Supply that reduces or cancels it is recorded and the details pertaining to it.”

In nutshell, it is an amendment to the Tax Invoice raised earlier due to amendments in the taxable supply for which such Tax Invoice was raised, leading to drop or cancellation in value of such a taxable supply.

GET A FREE CONSULTATION

What shall a Tax Credit Note include?

The UAE VAT Law requires that a Tax Credit Note, shall include the following,

• 1.
• The words “Tax Credit Note” clearly displayed on the invoice.

• 2.
• The name, address, and Tax Registration Number of the Registrant making the supply.

• 3.
• The name, address, and Tax Registration Number of the Recipient where he is a Registrant.

• 4.
• The date of issuing the Tax Credit Note.

• 5.
• The value of the supply shown on the Tax Invoice, the correct amount of the value of the supply, the difference between those two amounts, and the Tax charged that relates to that difference in AED.

• 6.
• A brief explanation of the circumstances giving rise to the issuing of the Tax Credit Note.

• 7.
• Information sufficient to identify the supply to which the Tax Credit Note relates.

Is it compulsory to issue a Tax Credit Note, in case of reduction or cancellation of a taxable supply?

Yes, for reduction or cancelation of a taxable supply impacting the Tax Invoice raised earlier, it is required to issue a Tax Credit Note to cancel out the VAT that was charged. Unless the applicant satisfies the conditions of Article 60(2) of UAE VAT Executive Regulations, which state on below lines,

Where, on application by a Taxable Person, the Authority 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 Credit Note be issued by the Taxable Person, the Authority may determine any of the following, subject to any conditions that the Authority may consider necessary:

• 1.
• Any one or more of the particulars specified in requirements of a Tax Credit Note shall not be contained on a Tax Credit Note.

• 2.
• A Tax Credit Note is not required to be issued.

Further UAE VAT Executive Regulations requires that where approval has been granted by the Authority on above basis, that approval may be withdrawn at any time where the Authority considers that the conditions of that approval have not been met.

Is it possible for the recipient of goods or services, to issue a Tax Credit Note?

Yes, it is possible for the customer/recipient of goods or services to issue a Tax Credit Note, provided below conditions are satisfied.

• 1.
• The Recipient of Goods or Recipient of Services is a Tax Registrant (which means recipient shall be VAT registered).

• 2.
• The Supplier and the Recipient of Goods or Recipient of Services agree that the Supplier shall not issue a Tax Credit Note in respect of any supply to which this applies.

• 3.
• The Tax Credit Note shall contain the particulars required for a Tax Credit Note as noted above.

• 4.
• The words “Tax Credit Note created by buyer” are clearly displayed on the Tax Credit Note

Only one party can issue a Tax Credit Note, so if recipient issued it, supplier cannot issue a Tax Credit Note.

GET A FREE CONSULTATION

If required more information on this, VAT services in Dubai & UAE, or you’d like to get tax consultancy in Dubai, please contact us at info@premier-brains.com

Note: This article not an official opinion but just views on certain matters. Reliance on this is at personal discretion of user without any liability on Premier Brains or the person who prepared it.