The seller issues a tax invoice once a customer buys a product or a service. In a country where tax on consumer is in place, then issuing a tax invoice is very important for almost every business, and not issuing it, is a serious crime. This guide will cover all the details that should be included in a standard tax invoice format from UAE’s Tax Law perspective.
Tax registered businesses need to charge VAT to their customers as they have to pay it to the government. For this purpose, the invoice is made, which is a written proof that tax has been charged by a tax registered entity to their customers. Issuing a Tax Invoice is compulsory for tax registered businesses in the UAE.
The seller who issues the tax invoice, must include the following details which are the necessities of a tax invoice, and it will be considered incomplete without them.
Tax registered businesses in the UAE who have met the minimum threshold requirement or have voluntarily registered themselves as a VAT registered entity with the FTA (Federal Tax Authority) are required to issue Tax/ VAT Invoices to their customers when a sale transaction happens. These Tax/ VAT invoices are required law by to be properly prepared, issued to the buyer, and a copy of it to be stored for a minimum period of 5-years.
Although there is not a fixed standard template design to be copied or a software invoicing tool to be bused and followed for preparing and issuing a Tax Invoice but companies such as large incorporations, SMEs, or even startups due to a higher amount of transactions are recommended to have a reliable computer-generated tax invoice system in place.
Having any of today’s advanced accounting software in your organization helps you to prepare and issue a compliant Tax Invoice in a matter of seconds. The good thing about any of the reliable advanced accounting software is that you can register part of the necessary information to be shown on the Tax Invoice at the beginning stage and then you don’t have to repeat this job when the next sequential invoices are issued. This is obviously saving time and efforts and also reduces the chances of human input error. Using an accounting software to generate a tax invoice is more like filling the blanks exercise, where you will be asked to fill up the details of what you’re selling and what tax rates are applicable, date and details of the buyer and etc.
Tax invoice is a lot necessary both for the buyer and the seller. The date of the tax invoice tells when the input/output tax is to be accounted for. The buyer and a seller being a registered tax registered entity is required to quarterly report to the FTA about the tax collections and spendings and to settle off the net balance. Tax Invoice is a track record and evidence to back-up the quarterly filling with FTA.
The tax invoice should show all the information discussed above; otherwise, it won't be accepted and is considered a serious non-compliance with the guidelines and instructions of the FTA.
Your accountant plays a vital role on taking care of this bit of today’s businesses requirement. Perhaps, even more important for the newly established SMEs and Startups that are under a controlled budget to afford a qualified and skilled accountant. At Zaitox, we understand the importance of taking care of VAT compliances for your business. That’s why our team of experts is ready to take care of all your accounting and VAT compliance requirements. We will use our decades of industry experience to help you in in VAT accounting and compliances of your business.
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