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:
|Condition||Date of supply shall be earliest of|
|1. Goods transferred under the supervision of supplier||Date on which goods have transferred||The date of receipt of payment||The date on which the tax invoice was issued|
|2. Where goods transferred but not supervised by supplier||Date on which recipient of goods takes possession|
|3. when goods involve assembly and installation||Date on which assembly or installation was complete|
|4. Import of goods||Date on which goods are imported|
|5. A supply made on returnable basis||Date on which supply is accepted by the recipient but not later than 12 months|
|6. Supply of services||Date 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:
- The Taxable Person receives and keeps the Tax Invoice as per the provisions of Decree-Law
- 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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