Tax credit notes in the UAE: when to issue one and what it must show

A registered business adjusts the VAT on a supply after the date of supply in these cases (Article 61 of the VAT Decree-Law):

• the supply was cancelled,
• the VAT treatment changed because the nature of the supply changed,
• the agreed price changed for any reason,
• the customer returned the goods, in full or in part, and was refunded in full or in part, or
• VAT was charged, or a VAT treatment applied, in error.

Where the adjustment reduces the VAT, a tax credit note is issued (Article 70(1)). Where it increases the VAT, the business issues a new tax invoice for the additional VAT instead (Article 62(1)).

The tax credit note must be issued within 14 days of the event that caused the adjustment (Article 62(2) of the VAT Decree-Law).

Article 60(1) of the Executive Regulation lists:

1. The words "Tax Credit Note", clearly displayed.
2. The supplier's name, address and TRN.
3. The customer's name, address and TRN, where the customer is VAT-registered.
4. The date the credit note is issued.
5. The value of the supply shown on the tax invoice, the corrected value, the difference between them and the VAT on that difference, in AED.
6. A brief explanation of why the credit note is being issued.
7. Enough information to identify the supply it relates to, such as the original invoice number.

Where more than one credit note is issued against the same invoice, each later one starts from the value as already adjusted by the earlier ones (Article 60(1)(e)).

• Normally the supplier.
• The customer, where both are VAT-registered and agree that the supplier will not issue credit notes for those supplies. The document must say "Tax Credit Note created by buyer" (Article 60(4)), and any credit note the supplier then issues for that supply does not count (Article 60(5)).
• A registered agent supplying on behalf of a principal, if both keep records of the other's name, address and TRN (Article 60(6)).

The Federal Tax Authority can, on application, waive some particulars or the credit note itself where records are sufficient and issuing one is impractical (Article 60(2)).

A credit note may be issued electronically if a copy can be stored securely and its origin and content are guaranteed (Article 60(3)). Once a business is within the e-invoicing system, credit notes must be issued and transmitted through it (Article 70(4) of the Decree-Law). For those, Article 60(1)(e), (2) and (3) no longer apply and the Ministry of Finance's data fields govern instead (Article 60(8)).

A business that is not registered issues ordinary credit notes, with no VAT on them and not titled "Tax Credit Note". It is good practice to reference the original invoice and the reason.