Tax Invoice –To Understand Tax Credit Note

Tax Invoice is important document to be issued by a registrant when a taxable supply of goods or services is transacted. As per  FTA, there are two kinds of invoices 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. 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.

Tax Credit Note is explained below.

How to prepare VAT Invoices in UAE for 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

How to prepare VAT Invoices in UAE for 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

Issuance of Tax Invoice- To Understand Tax Credit Note

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.

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.

What is a tax credit note?

Credit notes are issued by a supplier when the price for a supply of goods or services is reduced after a tax invoice was issued, for example when faulty goods are returned.

A Value-Added Tax (VAT) credit note is a document issued by a supplier to a customer on reduction or discount in the price on the original VAT invoice.

Why are Value Added Tax credit notes important?

The information given on a credit note helps establishing authenticity on the adjusted VAT figure on the supply of taxable goods or services.

It also enables VAT registered customer to adjust the figures for the total VAT charged to them on their purchases.

If you issue a credit note showing a lesser amount of VAT than is correct, you are liable for the deficiency.

When must a Value Added Tax credit note be issued?

A VAT registered entity who wants to correct their Value-Added Tax (VAT) invoice issues a VAT credit note when:

• there is a change in the original price because of an allowance, discount or similar adjustment
• the VAT rate on the original invoice was incorrect.

When is a Value Added Tax credit note not required?

Where you agree a reduction in the VAT exclusive price with your customer, there is no obligation to issue a credit note as long as the VAT payable is unchanged.

Payment of VAT to the government reduces on account of Credit Notes. Basically, goods  return or reduction in billing amount reduces the tax liability as the goods or services supplied have been reduced by that amount.

VAT Collected on Sales – VAT on Credit Notes = VAT payable to the government.

What information is required on a Value Added Tax credit note?

The Value-Added Tax (VAT) credit note must show:

• the date of issue
• Tax invoice no
• the supplier’s full name, address and VAT registration number
• the customer’s full name, address and VAT registration number
• in the case of an intra-Community supply, the customer’s VAT identification number in the other Member State
• the reason why the note is being issued
• a cross-reference to the original invoice
• the amended consideration
• the rate or rates of tax in force when the related invoice was issued
• the amount of tax at each rate.

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.

How to manage Vat when dealing with tax credit notes This is how Vat works if you issue tax credit notes:

If the original amount payable is reduced or cancelled, the seller can reduce the output tax declared. And the buyer must reduce the input tax by the reduction in input tax, as shown on the credit note.

In this case, you’d issue a credit note to cancel the original invoice and then issue a new tax invoice.

If details of a prompt payment discount are shown on the face of a tax invoice, it’s not necessary to issue a credit note when the customer takes up the discount.

You merely reduce your output tax by the tax fraction of the discount taken. The buyer must reduce the input tax claim accordingly.

Also keep in mind that if you cancel a tax invoice before issuing it, all copies of the cancelled invoice must remain with the supplier.

The Vat implications when you receive a credit note:

You must show the Vat amount as output tax at your Vat return. Alternatively, you could also reduce your input tax deduction with this amount.

Are there any requirements for credit notes?

Yes, credit notes must contain the following:

• The words ‘credit note’
• The name, address and Vat number of the supplier and recipient
• The date of issue
• The amount of the supply and the Vat
• A brief explanation as to why it was issued
• Information sufficient to identify the transaction to which it refers, for example, a reference to the original tax invoice.

What happens if the VAT Return has already been submitted at the time a Credit Note is issued?

When a Credit Note is issued, it means that the vendor making the supply declares in the VAT Return the output VAT which is increased by the amount of the difference between the VAT due on the transaction and the VAT actually paid on the transaction when the invoice was issued. This means that in the tax period in which the Credit Note is issued, the vendor who made the supply should make an input tax adjustment, that is, claim input VAT credit of the VAT difference that resulted from issuing the Credit Note which is equal to the output VAT overpaid on the transaction when the VAT invoice was issued. The vendor who receives the Credit Note on the other hand has claimed input VAT in a VAT Return which is increased by the amount of the difference between the VAT that was due on the transaction and the VAT actually paid on the transaction when the VAT invoice was issued. This means that in the tax period in which the Credit Note was received, the vendor who was issued with the Credit Note should make an Output Tax adjustment, that is, declare in the VAT Return the VAT difference that resulted from being issued with a Credit Note which is equal to the input VAT over claimed on the transaction when the VAT invoice was issued.

Need to upgrade to Reach online VAT Accounting Software :

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 OnlineVAT 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.

Benefits of Cloud Accounting

1. Spread the cost of the software by making payments by monthly subscription instead of one lump sum.
2. All the upgrades for cloud accounting software are carried out by the supplier at no extra cost, so you are always on the latest version.
3. You can access cloud accounting software anywhere that has an internet connection, so no need to use a particular computer or be stuck in the office.
4. As the name suggests, all the data is stored securely in “the cloud” which means on the supplier’s bank of servers, continually backed up, so you never have to worry again about using up your own hard-drive or taking regular backups.
5. Best of all, with cloud accounting software, your accountant can share your data, so they can help you if you are stuck on recording certain transactions in your accounts, like the purchase of a new laptop.  They can post their year-end journals directly, so your data is always up to date, but more importantly we can be more help to you.  For example if you would like your accountant to check the figures for your VAT Return or even file it,or prepare some management accounts for you, and even help you with key decisions in your business, the sky is the limit with cloud accounting software.