An advance is a supply for VAT the day the money lands.
A 30% advance on a fit-out contract is not just money in the bank. Receiving it creates a tax point, it needs a tax invoice, and every later claim has to take it back without declaring its VAT a second time.
6 minute read · Updated 20 October 2026 · Practical guidance, not tax advice: confirm anything that matters for your business with your tax agent or the Federal Tax Authority.
Receiving the payment is a date of supply.
Under the UAE VAT law, the date of supply is the earliest of the events that can trigger it, and receiving payment is one of them (Federal Decree-Law No. 8 of 2017, Article 25). So when a customer pays a 30% advance before any work is done, the VAT on that 30% belongs to the period you receive it.
A tax invoice is due within 14 days of the date of supply (Article 67). For an advance, that means an advance tax invoice for the amount received plus its VAT, with your TRN, your customer's TRN where they have one, the date and a description of what it is for.
- No delivery is needed first: an advance on an approved quotation is billed when it is received.
- The advance tax invoice declares its VAT once, in the period the money lands.
- Bank the money without the invoice and its VAT is missed in that period's return.
| Line | Amount |
|---|---|
| Advance payment (30%) | 300,000.00 |
| VAT (5%) | 15,000.00 |
| Total (AED) | 315,000.00 |
Each claim takes back its share, at the right value.
Every progress claim recovers its share of the advance until all of it is taken back. How it is deducted follows the claim's method.
Before VAT: the advance comes off at its net value, 90,000 on a 300,000 claim, because its VAT was declared when it was received.
After VAT: it comes off including its VAT, 94,500, and the claim declares only the VAT not already declared: 15,000 on the work, less the 4,500 declared on the advance tax invoice, is 10,500.
| Claim | Before VAT | After VAT |
|---|---|---|
| Claim 1 | 90,000.00 | 94,500.00 |
| Claim 2 | 120,000.00 | 126,000.00 |
| Claim 3 | 90,000.00 | 94,500.00 |
| Recovered in total | 300,000.00 | 315,000.00 |
The advance is a liability until the work is billed.
Until it is recovered, the advance is money you owe in work, not income. It sits in an advances account of its own, comes down with every claim, and is zero when the last claim has taken back its share.
- Banking the advance without an advance tax invoice, so its VAT is missed in the period it was received.
- On a before-VAT claim, deducting the advance at 315,000 instead of 300,000, which takes its VAT off twice.
- On an after-VAT claim, declaring VAT on the whole claim without subtracting the VAT already declared on the advance.
- Recovering more, or less, than was received: across the claims the advance comes off exactly once.
In Mizarah, recording an advance raises the advance tax invoice and declares its VAT the day the money is received, and each claim then recovers its share under your company's method until the advances account is back at zero.
Common questions.
- Do I need to deliver anything before invoicing an advance?
- No. An advance is billed when it is received, typically on an approved quotation, before anything is made or delivered.
- When is the VAT on an advance due?
- In the return for the period you receive it, because receiving payment is a date of supply. The tax invoice is due within 14 days of that date.
- Is the advance's VAT declared again on the claims?
- No. It is declared once, on the advance tax invoice. Before VAT, the claims deduct the advance at its net value. After VAT, they deduct it with its VAT and subtract that VAT from the VAT they declare.
- What if the contract is cancelled after the advance is paid?
- The advance is reversed with a tax credit note, which reverses its VAT, and you refund what is owed. Confirm the details for your case with your tax agent.
Read next: VAT on progress claims: before or after deductions · VAT 201 for UAE contractors · Signage & exhibition stands
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