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Want to get paid? How to invoice correctly in the UAE

Jun 14, 2017 | Finance

It goes without saying that invoicing has a hugely important role to play in the running of your business. Without timely invoices both sent and received, you could quickly see problems with your cash flow – the death knell of 82% of small businesses according to a recent survey.

But despite its importance, it’s a fact that accurate, timely invoicing is still something that many startups (both old and new) struggle with, particularly here in the UAE. And questions about invoicing are some of the most common enquires to business formation specialists in the region.

So why do entrepreneurs in the Emirates struggle to meet the mark when it comes to invoicing?

It largely comes down to the strict accounting requirements in the UAE regarding what should and should not appear on an invoice. While in many other countries across the world these parameters are broad, here in the Emirates any invoice that doesn’t comply entirely with these requirements is likely to be delayed, and in many cases will be returned altogether.

While in many other countries across the world these parameters are broad, here in the Emirates any invoice that doesn’t comply entirely with these requirements is likely to be delayed, and in many cases will be returned altogether.

For entrepreneurs running a business in one of the fastest moving marketplaces in the world, these kinds of inaccuracies can cause major headaches. That’s why it always pays – literally – to ensure that your invoices are delivered accurately and on time, every time.

Here’s what you need to know. 

UAE invoicing requirements – the checklist

Whenever you sell a product or service, you must issue an invoice detailing the nature of the work carried out, the cost of this work, and the timeframe in which the invoice should be paid. Your invoice should also contain instructions on how to pay. This usually consists of your corporate bank account details, though it is good practice to also include your SWIFT and/or IBAN numbers too. It is also possible for both free zone and mainland companies to take card payments via point of sale (POS) machines.

To ensure your invoice is clearly understood, use a professional and user-friendly template so that your clients know exactly what you are invoicing for and how and when they are expected to pay. Should you wish to use one, there are plenty of UAE-compliant invoice templates available online.

Now let’s take a detailed look at how to invoice in the UAE.

1. Basic information: The most basic elements of the invoice are also the most vital. The first thing to make clear is whether you are issuing an invoice or a credit. Making this distinction is quite simple, the word ‘invoice’ or ‘credit’ should be clearly stated at the top of the document.

It is also vital that you include the date that the invoice is raised. This is straightforward, though it is worth checking the most common date format (the order of day/month/year) for the country where your client is based.

Next up, you should assign each new invoice a unique number. There are several ways to do this, so choose the one which best suits your needs. You can either run invoice numbers sequentially (the first invoice issued would be 1 or 0001, followed by 0002, 0003 and so on), or you could invoice chronologically (the first section of the invoice number is the date followed by a sequential number – for example, 20170607-01).

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Finally, you might wish to differentiate between invoices sent to different clients. To do so, simply start your invoice number with a set customer number or code, followed again by a sequential number. Such as CUST-01 or 9999-01.

If you use invoicing software, most allow you to choose your own method of numbering invoices and will then generate the next in the sequence automatically every time you create a new document. 

2. Tax breakdown: Along with the cost of the goods or services being delivered, you are also required to state any taxes that are also payable on the invoice. This is where it’s important to seek advice from a company setup expert who can advise you on withholding tax (WHT) as well as VAT.

From January 2018, UAE companies with annual taxable revenues of over AED 375,000 will be required to add VAT to their invoices. VAT in the UAE is a flat 5% levy added to almost all goods and services, with the exception of basic food items, education and healthcare. This tax is paid to you by your customer and it is then your responsibility to pass this money to the government when you file your VAT return.

VAT in the UAE is a flat 5% levy added to almost all goods and services, with the exception of basic food items, education and healthcare.

3. Complete customer information: To avoid delays to payment – or worse, rejection of invoices – it is vital that you list full and accurate customer information. This should include the following:

  • Full name of the customer.
  • Full address of the customer. This should match the address stated in the purchase order.
  • The customer’s VAT Identification number (when available in the UAE). This is usually the Tax Identification Number (TIN) followed by the word ‘VAT’.

4. Complete supplier information: As with customer information, full supplier information must be included on your invoice to ensure it is processed and paid correctly. Once again, this should include:

  • Full name of the supplier.
  • Full address of the supplier. This address should match your licenced address. If you registered in a free zone, you must write the full address of the free zone. For example, if you are registered in Fujairah Creative Free Zone, the address would be ‘Fujairah Creative City, Creative Tower, Floors 17-19, Fujairah’. You are also permitted to list the address of the company that helped you set up as your correspondence address.
  • VAT Identification number (when available in the UAE). As above, this is usually the Tax Identification Number (TIN) followed by the word ‘VAT’.

5. Specify the goods and/or services that were provided: This is another criterion that seems so simple, yet a small mistake can lead to delayed or unpaid invoices. It is very important that you detail the goods and services for which you are invoicing. Each line item should contain a description of the work carried out along with the cost. This information must match the original PO for the work.

Each line item should contain a description of the work carried out along with the cost. This information must match the original PO for the work.

6. Amount and currency specifications: Using incorrect currency is a very common invoicing mistake in the UAE – largely due to the number of international entrepreneurs and companies that do business here. To be clear, you should invoice in the same currency as stated in the original PO. If you are invoicing in a foreign currency, you will be paid the prevailing exchange rate at the time the invoice is raised. The only exception here is the sale of services. In this case, the prevailing rate at the time the invoice is paid takes preference. 

7. Credit notes: Should an invoice need to be credited for any reason, you must issue your client with a credit note. As with invoices, there are several criteria which have to be met to ensure timely and accurate processing. Credit notes should include the following:

  • Credit note number. As with invoice numbers, they can be issued sequentially, chronologically or by client.
  • The invoice number that is to be credited. You should issue one credit note per invoice.
  • Reason for the credit note. This would usually be due to a price or quantity adjustment or the return of goods.

Get paid on time, every time

Naturally, invoicing plays a huge part in the smooth running of a business, particularly for small or new enterprises. Poor financial management is one of the leading reasons why startups fail and if cash flow is tight, an inaccurate invoice could be all it takes to sink your business.

The good news is that while the criteria for invoicing may be strict, it is not necessarily complex. Providing you take the right advice and stick to the guidelines above, there’s no reason why you shouldn’t get paid on time, every time.

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