Accepting of the advance payment is common practice in business. A large group of business group purely work on advance receipts only. After the introduction of Decree-LAw in UAE, VAT on advance payment received will become payable

Where will supplier show VAT on advance?

VAT on advance received will be reported and paid under box 1 of form 201. It will be shown as part of standard-rated supplies.

When will supplier issue tax invoice?

The supplier will issue an invoice on the date of supply or within 14 of the date of supply. The date of supply will be considered as:

ConditionDate of supply shall be earliest of
1.       Goods transferred under the supervision of supplierDate on which goods have transferredThe date of receipt of paymentThe date on which the tax invoice was issued
2.       Where goods transferred but not supervised by supplierDate on which recipient of goods takes possession
3.       when goods involve assembly and installationDate on which assembly or installation was complete
4.       Import of goodsDate on which goods are imported
5.       A supply made on returnable basisDate on which supply is accepted by the recipient but not later than 12 months
6.       Supply of servicesDate on which provision of supply was completed

How is VAT on advance payment shown by the recipient in VAT return?

Decree-law specifies following conditions should be fulfilled for recovering Tax paid:

  1. The Taxable Person receives and keeps the Tax Invoice as per the provisions of Decree-Law
  2. The Taxable Person pays the Consideration for the Supply or any part thereof

If the conditions are not fulfilled, he may recover tax in a subsequent tax return when conditions are fulfilled.

Reading of the provisions we can say that VAT paid with advance payment can be recovered provided, the receiver has tax invoice in possession. If the invoice is not available, it will be recovered in the tax period when tax invoice is received.

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The entire contents of this article is solely for information purpose and have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation.. It doesn't constitute professional advice or a formal recommendation. The author has undertook utmost care to disseminate the true and correct view and doesn't accept liability for any errors or omissions. You are kindly requested to verify & confirm the updates from the genuine sources before acting on any of the information's provided herein above.

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