What is a tax credit note and when is it needed?

Article 60 – Tax Credit Note 45,46 1. The Tax Credit Note shall contain all the following particulars: a. The words “Tax Credit Note” clearly displayed on the credit note.47 b. The name, address, and Tax Registration Number of the Registrant making the supply. c. The name, address, and Tax Registration Number of the Recipient where he is a Registrant. d. The date of issuing the Tax Credit Note. e. The value of the supply shown on the Tax Invoice, the correct amount of the value of the supply, the difference between those two amounts, and the Tax charged that relates to that difference in AED. In case more than one Tax Credit Note is issued in relation to the same Tax Invoice, the value of the supply shown on the Tax Invoice in the subsequent Tax Credit Note shall be the adjusted value based on the previous Tax Credit Note. f. A brief explanation of the circumstances giving rise to the issuing of the Tax Credit Note. 45 Article amended as per Cabinet Decision No. 100 of 2024. 46 Article amended as per Cabinet Decision No. 100 of 2025. 47 Paragraph amended as per Cabinet Decision No. 149 of 2026. Cabinet Decision No. 52 of 2017 and its amendments – As published by the Ministry of Finance 54 g. Information sufficient to identify the supply to which the Tax Credit Note relates. 2. Where, on application by a Registrant, the Authority considers that there are or will be sufficient records available to establish the particulars of any supply or class of supplies, and that it would be impractical to require that a Tax Credit Note be issued by the Registrant, the Authority may determine any of the following, subject to any conditions that the Authority may consider necessary: a. Any of the particulars referred to in Clause 1 of this Article shall not be contained in a Tax Credit Note. b. A Tax Credit Note is not required to be issued or delivered. 3. The Registrant may issue a Tax Credit Note by electronic means provided that: a. The Registrant must be capable of securely storing a copy of the Tax Credit Note in compliance with the record keeping requirements. b. The authenticity of origin and integrity of content of the Tax Credit Note should be guaranteed. 4. Where a Recipient of Goods or Recipient of Services agrees to raise a Tax Credit Note on behalf of a Registrant Supplier in respect of a supply of Goods or Services, that document shall be treated as if it had been issued by the supplier if the following conditions are met: a. The Recipient of Goods or Recipient of Services is a Registrant. b. The Supplier and the Recipient of Goods or Recipient of Services agree that the Supplier shall not issue a Tax Credit Note in respect of any supply to which this Clause applies. c. The Tax Credit Note shall contain the particulars required under Clause 1 of this Article. d. The words “Tax Credit Note created by buyer” are clearly displayed on the Tax Credit Note. 5. Where a Tax Credit Note is issued pursuant to Clause 4 of this Article, any tax credit note issued by the supplier in respect of that supply shall be deemed not to be a Tax Credit Note. 6. Where an agent who is a Registrant makes a supply of Goods and Services for and on behalf of the principal of that agent, that agent may issue a Tax Credit Note in relation to that supply as if that agent had made the supply, provided that the principal shall not issue a Tax Credit Note, subject to: a. the agent retaining sufficient records in such a manner as to determine the name, address and Tax Registration Number of the principal supplier, and Cabinet Decision No. 52 of 2017 and its amendments – As published by the Ministry of Finance 55 b. the principal supplier retaining sufficient records in such a manner as to determine the name, address and Tax Registration Number of the agent. 7. Where approval has been granted by the Authority under Clause 2 of this Article, that approval may be withdrawn at any time where the Authority considers that the conditions of that approval have not been met. 8. Where a Registrant is required to issue a Tax Credit Note in a form of an Electronic Credit Note pursuant to Clause 4 of Article 70 of the Decree-Law or where the Registrant issues a Tax Credit Note in the form of an Electronic Credit Note on a voluntary basis, Paragraph (e) of Clause 1, Clauses 2 and 3 of this Article and any other Clause as determined in a decision issued by the Minister shall not apply.

Article 70 - Conditions and Requirements for Issuing the Tax Credit Note31 1. The Registrant shall issue an original Tax Credit Note when a reduction of Output Tax occurs in relation to any supply made by him according to Clause 2 of Article 62 of this Decree-Law and deliver the same to the Recipient of Goods or Recipient of Services. 2. When making a Deemed Supply, the Registrant shall issue an original Tax Credit Note when a reduction occurs to the Output Tax in relation to such supply according to Article 61 of this Decree-Law and shall keep the same in his records. 3. The Executive Regulation of this Decree-Law shall specify the following: a. Basic data that should be included in the Tax Credit Note in instances where the Taxable Person is required to issue such note. b. The conditions and procedures required to issue a Tax Credit Note by electronic means. c. Instances where the Registrant is not required to issue and deliver a Tax Credit Note to the Recipient of Goods or the Recipient of Services. d. Instances where other documents may be issued in place of the Tax Credit Note as well as conditions for the issuance of such document and the data to be included therein. e. Instances where another Person may issue a Tax Credit Note on behalf of the registered supplier. 4. For the purpose of this Article, the Registrant subject to the Electronic Invoicing System must issue and transmit the Tax Credit Note in the form of an Electronic Credit Note, in accordance with the Electronic Invoicing System. Title Eight – Tax Period, Tax Returns, Settlement and Reclaiming of Tax Chapter One – Tax Period

12.4. Adjusting output tax on tax invoices There may be instances where output tax originally charged on a supply has to be adjusted – for example, due to an adjustment of the price or due to a mistake. In such instances, the supplier must account for the correct amount of VAT, and must issue a document recording the correction. Thus, where the output tax charged is less than the output tax that should have been charged following the adjustment (i.e. there has been a price increase), the supplier must issue a tax invoice for the difference and provide it to the recipient, with the following effects:   the supplier has to account for the additional output tax to the FTA on the tax return that relates to the tax period in which the adjustment is made; and the recipient can treat the additional VAT incurred as input tax subject to the normal input tax recovery rules in the tax return for the tax period in which the tax invoice is received. . In contrast, where the output tax charged is more than the output tax that should have been charged following the adjustment (i.e. there has been a price decrease), the supplier must issue, and provide to the recipient, a tax credit note, with the following effects:   the supplier can recover from the FTA the output tax which was previously accounted for in respect of the amount of reduction, by reducing the output tax in the tax return for the tax period in which the adjustment is made; and the recipient must reduce their input tax by the amount of VAT related to the reduced amount in the tax return for the tax period in which the tax credit note is received. 12.4.1. Key requirements of a tax credit note In order for a tax credit note to be valid, it must reflect the error in the original tax invoice. Therefore, a credit note should contain the following:        the words “Tax Credit Note”; the name, address, and TRN of the supplier; where the recipient is registered for VAT, their name, address, and TRN; the date of issuing the tax credit note; the value of the supply shown on the tax invoice, the correct amount of the value of the supply, the difference between those two amounts, and the VAT charged that relates to that difference in AED; a brief explanation of the circumstances giving rise to the adjustment; and information sufficient to identify the supply to which the adjustment relates. Similar to tax invoices, the FTA has the ability to determine situations when tax credit notes are unnecessary or can contain different particulars. Similarly, a tax credit note 49 VAT Guide | Taxable Person | VATG001