Mechanism for Output Tax Adjustment
The Output Tax shall be adjusted according to the following:
- If the Output Tax due for the supply exceeds the Output Tax calculated by the Registrant, the Registrant shall issue a new Tax Invoice for the additional amount of Tax and calculate the additional Tax due for the Tax Period during which such an increase was identified.
- If the Output Tax calculated by the Registrant exceeds the Output Tax which should have been charged on the supply, the Registrant shall issue a Tax Credit Note according to the provisions of this Decree-Law.
Adjustment due to the Issuance of Tax Credit Notes
Without prejudice to Clause (2) of Article (62) of this Decree-Law, if the Registrant issues a Tax Credit Note to correct Output Tax charged to the Recipient of Goods or Recipient of Services, the Tax stated in the Tax Credit Note shall be considered as:
- A reduction of the Output Tax for the Registrant of this Tax Credit Note.
- A reduction of the Input Tax by the Recipient of Goods or Recipient of Services for the Tax Period during which the Tax Credit Note was received.
Adjustment for Bad Debts
- A Registrant supplier may reduce the Output Tax in a current Tax Period to adjust the Output Tax paid for any previous Tax Period if all of the following conditions are met:
- Goods and Services have been supplied and the Due Tax has been charged and paid.
- Consideration for the supply has been written off in full or part as a bad debt in the accounts of the supplier.
- More than six (6) months has passed from the date of the supply.
- The Registrant supplier has notified the Recipient of Goods and the Recipient of Services of the amount of Consideration for the supply that has been written off.
- The registered Recipient of Goods or Recipient of Services shall reduce the Recoverable Input Tax for the current Tax Period related to a supply received during any previous Tax Period where the Consideration has not been paid and all of the following conditions are met:
- The registered supplier reduced the Output Tax as stated in Clause (1) of this Article and the Recipient of Goods and the Recipient of Services has received a notification from the supplier of the Consideration being written off.
- The Recipient of Goods and Recipient of Services received the Goods and Services and the relevant Input Tax was deducted.
- The Consideration was not paid in full or in part for the supply for over (6) six months.
- The reduction stated in Clause (1) and (2) shall be equal to the Tax related to the Consideration which has been written off according to paragraph (b) of Clause (1) of this Article.
Conditions and Requirements for Issuing Tax Invoices
- A Registrant making a Taxable Supply shall issue an original Tax Invoice and deliver it to the Recipient of Goods or Recipient of Services.
- A Registrant making a Deemed Supply shall issue an original Tax Invoice and deliver it to a Recipient of Goods or Recipient of Services if available or keep it in his records if there is no Recipient of Goods or Recipient of Services.
- The Executive Regulation of this Decree-Law shall specify the following:
- Data to be included in the Tax Invoice.
- The conditions and procedures required to issue an electronic Tax Invoice.
- Instances where the Registrant is not required to issue and deliver a Tax Invoice to the Recipient of Goods or the Recipient of Services.
- Instances where other documents may be issued in place of the Tax Invoice as well as the conditions thereof and the data to be included therein.
- Instances where another Person may issue a Tax Invoice on behalf of the registered supplier.
- Any Person who receives an amount as Tax pursuant to any document issued by him shall pay this amount to the Authority even if it is not due.
Document of Supplies to an Implementing States
Without prejudice to Article (65) of this Decree-Law, each Registrant who supplies Goods or Services considered as supplied in any of the Implementing States, shall provide the Recipient of Goods and Recipient of Services with a document that includes all the information that must be included in the Tax Invoice and any other information as specified in the Executive Regulation of this Decree-Law, provided that this document is not labelled “Tax Invoice” and does not include any Tax charged.
Date of Issuance of Tax Invoice
The Registrant shall issue a Tax Invoice within 14 days as of the date of supply as stated in Article (25) of this Decree-Law.
Rounding on Tax Invoices
For the purpose of stating the Tax due on a Tax Invoice, the Executive Regulation of this Decree-Law shall specify the method of calculation and stating the total amount to be paid if the Tax is less than one fils of a UAE Dirham.
Currency Used on Tax Invoices
If the supply is in a currency other than the UAE Dirham, then for the purposes of the Tax Invoice, the amount stated in the Tax Invoice shall be converted into the UAE Dirham according to the exchange rate approved by the Central Bank at the date of supply.
Tax Credit Notes
Conditions and Requirements for Issuing Tax Credit Note
- The Registrant shall issue an original Tax Credit Note when a reduction of Output Tax occurs in relation to any supply made by him according to Clause (2) of Article (62) of this Decree-Law and deliver the same to the Recipient of Goods or Recipient of Services.
- When making a Deemed Supply, the Registrant shall issue an original Tax Credit Note when a reduction occurs to the Output Tax in relation to such supply according to Article (61) of this Decree-Law and shall keep the same in his records.
- The Executive Regulation of this Decree-Law shall specify the following:
- Basic data that should be included in the Tax Credit Note in instances where the Taxable Person is required to issue this Note.
- The conditions and procedures required for the issuance of an electronic Tax Credit Note.
- Instances where the Registrant is not required to issue and deliver a Tax Credit Note to the Recipient of Goods or the Recipient of Services.
- Instances where other documents may be issued in place of the Tax Credit Note as well as conditions for the issuance of such document and the data to be included therein.
- Instances where another Person may issue a Tax Credit Note on behalf of the registered supplier.
Tax Period, Tax Returns, Payment and Reclaiming of Tax
Duration of Tax Period
The Executive Regulation of this Decree-Law shall specify the Tax Period for which the Taxable Person shall calculate and pay Tax as well as the exceptional circumstances in which the Authority may amend the Tax Period.
Tax Returns and Tax Payment
Submission of Tax Returns
- The Taxable Person shall submit the Tax Return to the Authority at the end of each Tax Period within the time limits and according to the procedures specified in the Executive Regulation of this Decree-Law declaring all supplies made and received during that Tax Period.
- A Cabinet Decision shall be issued upon the recommendation of the Minister, determining the Government Entities that may submit simplified Tax Returns to the Authority.
Payment of Tax
The Executive Regulation of this Decree-Law shall specify the time limits and procedures for payment of Tax stated as payable in the Tax Return according to the provisions of this Decree-Law.
Carrying forward the Excess of Recoverable Tax and Tax Recovery
Excess Recoverable Tax
- With the exception of what will be stipulated in the Executive Regulation of this Decree-Law, the Taxable Person shall carry forward any excess of Recoverable Tax to the subsequent Tax Periods and offset such excess against Payable Tax or any Administrative Penalties imposed under this Decree-Law or Federal Law No. (7) of 2017 on Tax Procedures in subsequent Tax Periods until such excess is fully utilised, in the following cases:
- If the Taxable Person’s Recoverable Input Tax set forth in this Decree-Law exceeds the Output Tax payable for the same Tax Period.
- If the Tax paid to the Authority by the Taxable Person exceeds the Payable Tax according to the provisions of this Decree-Law, other than in the instance mentioned in paragraph (a) of Clause (1) of this Article.
- If there remains any excess for any Tax Period after being carried forward for a period of time, the Taxable Person may apply to the Authority to reclaim the remaining excess. The Executive Regulation of this Decree-Law shall specify the time limits, procedures and mechanisms of returning any remaining excess to the Taxable Person.
Other Provisions on Recovery of Tax
Tax Recovery in Special Cases
The Authority may according to the conditions, restrictions and procedures specified in the Executive Regulations of this Decree-Law, return Tax paid for any supply received by or Import carried out by anyone of the following:
- A A citizen of the State in respect of the Goods and Services related to the construction of a new residence that is not part of the Person’s Business.
- A Non-Resident, who is not a Resident of an Implementing State and conducts a Business and is not a Taxable Person.
- A Non-Resident, for Goods supplied to him in the State and that will be exported.
- Foreign governments, international organisations, diplomatic bodies and missions according to treaties that the State is a party to.
- Any Persons or classes listed in a Cabinet Decision issued at the suggestion of the Minister.
Violations and Penalties
Administrative Penalties Assessment
Without prejudice to the provisions of Federal Law No. (7) of 2017 on Tax Procedures, the Authority shall issue an Administrative Penalty Assessment to the Person and notify the Person of the same within five (5) business days as of the date of issuance in any of the following cases:
- Failure by the Taxable Person to display prices inclusive of Tax according to Article (38) of this Decree-Law.
- Failure by the Taxable Person to notify the Authority of applying Tax based on the margin according to Article (43) of this Decree-Law.
- Failure to comply with the conditions and procedures related to keeping the Goods in a Designated Zone or moving them to another Designated Zone.
- Failure by the Taxable Person to issue the Tax invoice or an alternative document when making any Supply.
- Failure by the Taxable Person to issue a Tax Credit Note or an alternative document.
- Failure by the Taxable Person to comply with the conditions and procedures regarding the issuance of electronic Tax Invoices and electronic Tax Credit Notes.
If it is proven that a Person who is not a Registrant acquires Goods referred to in Clause (3) of Article 48 of this Decree-Law, claiming that he is a Registrant, he shall be considered as having committed Tax Evasion and shall be subject to the penalties provided for in Federal Law No. (7) of 2017 on Tax Procedures.
- Without prejudice to the provisions related to record-keeping stated in any other law, the Taxable Person shall keep the following records:
- Records of all supplies and Imports of Goods and Services.
- All Tax Invoices and alternative documents related to receiving Goods or Services.
- All Tax Credit Notes and alternative documents received.
- All Tax Invoices and alternative documents issued.
- All Tax Credit Notes and alternative documents issued.
- Records of Goods and Services that have been disposed of or used for matters not related to Business, showing Taxes paid for the same.
- Records of Goods and Services purchased and for which the Input Tax was not deducted.
- Records of exported Goods and Services.
- Records of adjustments or corrections made to accounts or Tax Invoices.
- Records of any Taxable Supplies made or received in accordance with Clause (3) of Article 48 of this Decree-Law, including any declarations provided or received in respect of those Taxable Supplies.
- A Tax Record that includes the following information:
- Due Tax on Taxable Supplies.
- Due Tax on Taxable Supplies pursuant to the mechanism in Clause (1) of Article (48) of this Decree-Law.
- Due Tax after the error correction or adjustment.
- Recoverable Tax for supplies or Imports.
- Recoverable Tax after the error correction or adjustment.
- The Executive Regulation of this Decree-Law shall specify the following:
- Time limits, restrictions and conditions for keeping the records listed in Clause (1) of this Article.
- Restrictions and procedures regarding the maintenance of the confidentiality of the records that may be accessed by the Authority in the case of Government Entities mentioned under Clause (2) of Article (72) of this Decree-Law.
Stating the Tax Registration Number
The Taxable Person or any other Person authorised in writing by him shall state the Tax Registration Number on each Tax Return, notification, Tax Invoice, Tax Credit Note, and any other document related to Tax or correspondence as required under this Decree-Law or said Federal Law No. (7) of 2017 on Tax Procedures.
- If the supplier receives Consideration or part thereof or issues an invoice for Goods or Services before the Decree-Law comes into effect, the date of supply shall be the same as the effective date of the Decree-Law in the following instances if they occur after the effective date of the Decree-Law:
- Transfer of Goods under the supervision of the supplier.
- Placing the Goods at the recipient’s disposal.
- The completion of assembly or installation of the Goods.
- The issuance of the customs declaration.
- The acceptance by the Reciepient of Goods of the supply.
- If a contract has been concluded prior to the enforcement of this Decree-Law, regarding a supply to be wholly or partly made after the effective date of this Decree-Law, but such contract does not contain clauses related to Tax on the supply, it shall be treated as per the following:
- The Consideration shall be considered inclusive of Tax if chargeable according to this Decree-Law.
- Tax shall be calculated on the supply regardless of whether it has been taken into account when determining the Consideration for the supply.
- The Executive Regulation of this Decree-Law shall set forth special provisions related to the implementation of this Decree-Law where a contract has been concluded before the effective date of the Decree-Law but the supply under the contract is wholly or partly made after the effective date of this Decree-Law.
Tax revenues and Administrative Penalties set forth in the provisions of this Decree-Law shall be subject to sharing between the Federal Government and the Emirates Governments based on the provisions of Federal Decree-Law No. (13) of 2016 On the Establishment of the Federal Tax Authority.
The Cabinet shall issue the Executive Regulation of this Decree-Law at the suggestion of the Minister.
In case of absence of a special provision in this Decree-Law, the provisions of Federal Law No. (7) of 2017 on Tax Procedures shall be applied.
Cancellation of Conflicting Provisions
Any text or provisions contrary to or inconsistent with the provisions of this Decree-Law shall be abrogated.
Effective Date of this Decree-Law and its Application
This Decree-Law shall be published in the Official Gazette and shall come into effect as of January 1, 2018.
Khalifa bin Zayed Al Nahyan
President of the United Arab Emirates
Issued by us at the Presidential Palace in Abu Dhabi
On: 1 /12/1438 H.
Corresponding to: 23/ 8 /2017