VAT Public Clarification on “VAT – free” special offers (VATP020)

The UAE Federal Tax Authority (FTA) has published VAT Public Clarification on promotional goods/services that are often marketed as ‘VAT-free’ special offers.


Many retailers are advertising their products with an offer such as “VAT-free”. Referring to such “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.

Liability to impose

Any promotional campaign stating that the supply of promotional goods is “VAT-free” is misleading as the seller is obliged to impose VAT on these supplies. The seller may, however, make a commercial decision to offer a discount equivalent to the amount of VAT. Consequently, VAT is always payable on taxable supplies and the seller is not entitled to choose whether or not VAT should be imposed on a supply.


In the case of a discount, the value of the supply is reduced in proportion to the discount. For example, if a motor vehicle’s normal selling price is AED105,000 and a special VAT-on-us promotional price is AED100,000, the seller is regarded as providing a AED5,000 discount to its customer.

VAT Inclusive Prices

A business may expressly advertise prices as “VAT-free” in respect of retail sales as part of business / marketing promotion labelling. However, the price charged to the customer shall include VAT. For example, if during the promotional period a motor vehicle is advertised for AED100,000 “VAT free”, the consideration for the supply is AED100,000. The seller is therefore required to account for AED4,761.90 VAT (VAT = 100,000 / 21 = 4,761.90) in its tax return, regardless of the wording used in the promotional campaign.

Tax Invoice

All tax invoices issued in respect of taxable promotional goods or services shall meet all the requirements set out in Article 59 of the Executive Regulation.


You may email us or can contact any of our team members relating to your queries on this subject:

Stany Pereira
Managing Partner

Sarika Dhameja
Director – Tax Services

Mradul Gupta

Rahul Shah
Assistant Manager – Tax


This document has been prepared as a general guide. It is not substitute for professional advice. Neither PKF UAE nor its partners or employees accept any responsibility for loss or damage incurred as a result of acting or refraining from acting upon anything contained in or omitted from this document. PKFUAE is a member firm of the PKF International Ltd family of legally independent firms and does not accept any responsibility or liability for the actions or inactions on the part of any other individual member or correspondent firm or firms.