Tax Credit Note (UAE): Format, Template and FTA Rules

A tax credit note is the document a VAT-registered business in the UAE issues when the VAT it charged on a tax invoice turns out to be too high: the customer returned goods, the price was cut, the supply was cancelled, or VAT was charged in error. This page sets out when the law requires one, the seven particulars it must carry, how it works when there are several adjustments to the same invoice, and what changes under e-invoicing. The editable template is available in Word, PDF and Excel, and every rule below was checked against the VAT law and its Executive Regulation on 27 September 2026.

When you must issue a tax credit note

Article 61 of the VAT law lists five situations in which a registrant has to adjust the output tax on a supply after it was made:

• the supply was cancelled;
• the tax treatment changed because the nature of the supply changed;
• the agreed price was changed for any reason;
• the customer returned the goods or services in full or in part and the price was refunded in full or in part;
• tax was charged, or a tax treatment applied, in error.

Article 62 then decides which document you issue. If the adjustment reduces the tax, you issue a tax credit note within 14 days of the date on which the situation arose. The deadline has applied since 1 January 2023, and the FTA counts it in calendar days; in its own example, laptops returned in January and refunded on 6 February required a credit note by 20 February, 14 days after the refund. If the adjustment increases the tax, you issue a new tax invoice for the additional amount and account for it in the tax period in which you identified the increase. The UAE VAT law has no separate “debit note” for tax purposes: an increase always goes on a new tax invoice.

Article 70 adds two practical duties: the credit note must be an original, and it must be delivered to the customer.

What a tax credit note must contain

Article 60 of the Executive Regulation lists seven particulars. A document missing any of them is not a valid tax credit note, whatever it is called.

Unlike a tax invoice, a tax credit note does not have to carry a sequential number, although numbering them makes the audit trail easier. It can be issued electronically. Article 79 of the VAT law separately requires the TRN on every tax credit note. From 1 October 2026 the first particular is reworded by Cabinet Decision No. 149 of 2026 so that the words “Tax Credit Note” must appear “on the credit note” rather than “on the invoice”. The requirement itself does not change.

Several credit notes against one invoice

When you issue a second credit note against the same tax invoice, the “value of the supply shown on the tax invoice” is no longer the original figure: it is the value already adjusted by the first credit note. The FTA gives an example in its public clarification VATP040: goods sold for AED 105 including VAT, a first credit note for AED 21 including VAT, and on the next credit note the value of the supply is shown as AED 80, that is AED 100 minus AED 20.

The template has a single adjustment table. For a second or later note, enter the adjusted value in the first row and keep the earlier credit note numbers in the reason line, so the chain can be followed in an audit.

A worked example

You invoiced a customer for 10 units at AED 200 each: AED 2,000 plus AED 100 VAT, AED 2,100 in total. Two units are returned and refunded.

The reason line reads, for example, “Return of 2 units received on [date], original tax invoice INV-0123 dated [date]”. The credit note is issued within 14 days of the return.

How the credit note changes both VAT returns

Article 63 of the VAT law treats the tax stated on the credit note as a reduction of the supplier’s output tax, and as a reduction of the customer’s input tax for the tax period in which the customer received it. The supplier pays less VAT; a registered customer recovers less. That is why the customer needs the original document and why its TRN must be on it.

Tax credit note or commercial credit note

Businesses often issue credit notes that have nothing to do with VAT: a goodwill credit, a volume rebate held on account, or a credit note from a business that is not VAT registered. Those are commercial documents and the seven particulars do not apply to them. The moment a credit note reduces VAT you charged as a registrant, it has to meet Article 60 in full. If you are not registered for VAT, you do not charge VAT and cannot issue a tax credit note at all; use a plain credit note that refers to your original invoice.

Tax credit notes under e-invoicing

The UAE electronic invoicing system covers credit notes as well as invoices. Ministerial Decision No. 243 of 2025 requires an electronic credit note where the business transaction is cancelled, the agreed price is reduced for any reason, the price is returned in full or in part, or an administrative or numerical error occurred. A VAT registrant issues and transmits it within the deadline set by the VAT law; otherwise it must be issued within 14 days of the date of the transaction. Electronic invoices and credit notes and their data must be stored inside the UAE. The Ministry of Finance states that a PDF or Word file is not an electronic invoice, and businesses selling only to consumers stay outside the system until a ministerial decision brings them in.

The mandatory start dates, as amended by Ministerial Decision No. 66 of 2026:

Until e-invoicing becomes mandatory for your business, the Article 60 rules above are the ones to follow, and the template on this page is built around them.

Records to keep

Article 78 of the VAT law requires you to keep every tax credit note you issue and every one you receive, together with the records of adjustments or corrections made to your accounts or tax invoices. The tax procedures rules set the retention period at five years after the end of the tax period, longer if an audit or dispute is open. Keep the credit note with the original tax invoice and the evidence of the event behind it, such as the return note or the agreement to reduce the price.

The penalty for a late or missing credit note

Failing to issue a tax credit note within the period the law sets costs AED 2,500 for each detected case, under the administrative penalties table as amended by Cabinet Decision No. 129 of 2025, in force since 14 April 2026. The same amount applies per case to a missing tax invoice.

Common mistakes

• Issuing a credit note when the VAT was too low. The law requires a new tax invoice for the extra tax instead.
• Leaving out the original invoice number, which is how the supply is identified.
• Showing only the new total, without the original value, the correct value, the difference and the VAT on the difference.
• Missing the customer’s TRN when the customer is VAT registered.
• Using the original invoice value on a second credit note instead of the value already adjusted by the first.
• Issuing it weeks after the return or the price change. The deadline is 14 days from the event.
• Using a credit note to write off a bad debt. Bad debt relief under Article 64 works through a notification to the customer of the amount written off, not through a tax credit note.

For the invoice itself, see the UAE tax invoice format and template, and for a business that is not registered, the simple invoice template. When a price is agreed before the supply, a quotation sets it out.