What are the key elements of a tax invoice?

What is a tax invoice?

The tax invoice is a key document for every transaction of a VAT-registered business.

Only businesses registered for VAT to the Federal Tax Authority (FTA) are allowed to charge VAT.

Registrants are obligated by the law to issue a VAT invoice every time they make a taxable supply.

If they lack to do so, they could face high penalties.

They also must receive a tax invoice from their suppliers every time they buy a taxable supply.

What elements must appear on an invoice?

The invoice must contain:

  • The title “Tax Invoice”
  • The company name, address, and Tax Registration Number of the supplier
  • The company name, address, and Tax Registration Number of the recipient (if the recipient is tax-registered)
  • The date of supply and the date of issue (if they are different)
  • The NET amount payable
  • The payable VAT amount
  • The discounts (if there are any)
  • The total amount.

Why is it important that the tax invoice is correctly drafted?

At the end of each tax period, businesses registered to VAT have to declare and pay the recoverable amount of VAT that they collected during their sales.

However, the company may deduct (from the total cost) the VAT they had paid for their supplies. This will show their VAT liability.

In order to deduct this, businesses must have legit justifications such as tax invoices with the key elements. Otherwise, the VAT won’t be claimable.

This rule applies regardless of the origin of the invoices. Therefore, it is important to stay vigilant and fill out all necessary information onto your invoices, whilst also verifying that the information appears on the tax invoices of your suppliers.

Having a VAT reimbursement rejected incurs a non-negligible financial cost.

We recommend paying attention to the elements on the invoices. We also advise you to use the services of a tax agent to assist you in all of your VAT-related obligations (Have a look at our article here about the role of the tax agent).

CTC Accounting is a tax agency registered to the FTA; don’t hesitate to contact us for more information.