Numerous retailers are offering "VAT-free special offers" as promotions to entice prospective buyers to purchase goods or services within a promotional period.
Referring to "VAT-free special offers" is misleading and contrary to the VAT legislation, since the goods or services are not actually supplied free of VAT.
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.
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.
In this clarification, Federal Decree-Law No. 8 of 2017 on Value Added Tax is referred to as "Decree-Law", Cabinet Decision No. 52 of 2017 on the Executive Regulation of the Federal Decree-Law No. 8 of 2017 on Value Added Tax and its amendments is referred to as the "Executive Regulation", Federa...