From Jan 1, 2018, the Value Added Tax (VAT) was introduced in the UAE. Also known as a consumption tax, in VAT, the values added by businesses at every point in the supply chain (manufacturer to consumer) are taxed.
A business pays VAT on its purchase of inputs and collects it on its sales, whether those sales are to another business or the final consumer. VAT is also applicable on the resale of goods.
In simple terms, the tax is collected only on the value added to the product.
What is Tax Registration Number (TRN) in VAT?
As per the laws in UAE, customers should pay VAT only if tax invoice includes the following details:
- TRN number, name and address of the trader/business owner.
- Sequential tax invoice number or the correct date of issue.
- A very clear description of the goods or services supplied by the trader.
- The invoice must mention the price per unit and the quantity of supply.
- The invoice should very precisely mention the applicable rate of tax and the total amount that the customer has to pay.
Why is TRN important for VAT in UAE?
TRN is a unique identification number for business owners. The records of sales and purchase made by an individual or business owner can be easily mapped using TRN. However, some traders in UAE are not including TRN number on their invoices and still charging VAT.
Those traders/ business owners who have not received the TRN certificate cannot charge VAT on their sale or service.
So it is important that customers are aware of the fact that unless and until businesses provide Tax Invoices with TRN number, customers should not pay VAT for the purchase made or services used.