Public Clarification on «VAT-free» special offers (VATP020)

The Federal Tax Authority of the UAE (herein the FTA) has published its new Public Clarification on “VAT - free” special offers VATP020 in which it reconfirms some widely applicable principles.

This Public Clarification clarifies the VAT treatment of promotions where the seller absorbs VAT on promotional goods. For purposes of this clarification, the term “promotional goods” refers to goods which are sold as part of a special promotion.

The FTA summarise that VAT registered businesses should not advertise taxable goods or services as free of VAT or sell such goods or services without accounting for 5% VAT, except where the supply qualifies for zero-rating.