Tax Credit Note is one of the VAT invoices that a registered taxpayer issues to customers in specific conditions. In this article, we will learn more about the eligibility, conditions, and format of Tax Credit Note.
The VAT rules of GCC make it compulsory for registered taxpayers to attach proper VAT invoices for all their sales and purchases. The FTA has already prescribed formats for tax invoices, debit/credit notes and other tax-related documents to be used by businesses in the UAE.
Table of Contents
Tax Credit Note Conditions & Eligibility
A tax credit note is one of the tax documents. It can be generated electronically or manually and issued only by a VAT registered supplier of taxable goods or services in the following situations:
- To record the supplies that are returned by the recipient
- To record a drop in the value of the supply
- To record a decrease in the tax value for a particular supply
Any registered supplier in UAE who accepts the return of a taxable supply made by him on which VAT was paid is eligible to issue a tax credit note for such returns.
The purpose of a credit note is to reverse the VAT that was charged on the cancelled/returned supply.
On issuance of a tax credit note, the supplier will have to pay reduced tax amount while filing their tax returns. The recipient, if registered under VAT, cannot claim a refund of the tax paid on a supply for which credit note has been issued.
VAT Tax Credit Note Format
Tax credit note can be generated online via FTA website. You can also find the credit note format online. A rough format has been attached below.
Other Things to Know about VAT Credit Note
The taxable person creating a tax credit note electronically is required to store a copy of the note for the record-keeping purpose.
The taxable person should be able to provide proof to verify the integrity of the information and credibility of origin of a tax credit note that was electronically generated by them
Registered suppliers in the UAE must know the rules involved with the generation and issuance of tax credit notes against returned supplies. Credit notes are applicable only in specific conditions.
Make sure that you keep proper records of all such supplies along with valid credit notes. Suppliers must also ensure that credit notes issued by them are complete and have all the mandatory information. The recipient must also keep a proper record of credit notes issued to them.