VAT on deposits UAE: advance payments, the date of supply and invoicing

You ask in plain English, the AI does the bookkeeping work, and you or your accountant approve the result.

• You ask: “We received 105,000 dirhams deposit from Marina Towers today for the fit-out. Record it.”
• The AI agent: HelloBooks matches the receipt on your bank statement, records it as a customer advance of AED 100,000 plus AED 5,000 output VAT, links it to the Marina Towers project and drafts the tax invoice for the deposit.
• You review: You confirm the deposit is for a standard-rated supply, approve the invoice and check it later offsets correctly against the final bill.

Article 25 of Federal Decree-Law No. 8 of 2017 makes the date of supply the earliest of the events it lists, and Article 25(7) includes the date of receipt of payment or the date the tax invoice was issued. So a deposit received before delivery, or before a service is completed, sets the date of supply for the amount received.

Article 19 of the Executive Regulation then says the tax is due to the extent of the payment made or stated in the tax invoice. The balance falls due when its own triggering event happens.

Deposits are usually received as a VAT-inclusive sum. To find the tax at 5%, multiply the amount by 5 and divide by 105. A fit-out contractor in Dubai Marina receiving AED 105,000 holds AED 100,000 of consideration and AED 5,000 of output VAT, reportable in the period the money arrives.

When the work finishes and the final invoice of AED 420,000 plus AED 21,000 VAT is issued, the invoice deducts the deposit already taxed, leaving AED 315,000 plus AED 15,750 VAT for the final period.

For contracts with periodic or consecutive invoices, Article 26(1) sets the date of supply as the earliest of the invoice issue date, the payment due date, the date payment is received, or one year after the supply. Annual software or maintenance contracts paid upfront fall under this rule.

Once a date of supply is set, Article 67(1) requires a tax invoice within 14 days, so a deposit should be invoiced promptly.

• Deposit received: VAT due on the amount received
• Tax invoice for the deposit within 14 days
• Final invoice deducts the deposit and its VAT
• Refunded deposits need a tax credit note

HelloBooks records customer advances against a project or job, posts the output VAT when the money arrives, and carries the balance into the final invoice so nothing is taxed twice. The AI agent spots incoming deposits during bank statement matching and asks whether to treat them as advances. Contractors who need progress-billing reports or custom approval steps can book a call at /book-a-demo.