Numerous retailers are offering “VAT-free special offers” as promotions to entice prospective buyers to purchase goods or services within a promotional period. But the reference 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.



  • According to Article 2(1) of the Decree-Law, VAT shall be imposed on every taxable and deemed supply made by a taxable person.
  • Consequently, where the seller is a taxable person, the seller is, according to Article 3 of the Decree-Law1, required to impose 5% VAT on the supply of all goods and services in the UAE, except where the Decree-Law explicitly provides for zero-rating or exemption.



  • 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.

A) The seller may, however, make a commercial decision to offer a discount to its customer which is equal to the VAT amount          imposed on the promotional goods or services which is commonly referred to as “VAT-on-us” promotions. the value of a discount shall be the amount by which the Consideration is reduced.


B) According to Article 38 of the Decree-Law4, the advertised price of taxable supplies shall include the VAT. Even though a business may expressly advertise prices as “VAT-free” in respect of retail sales as part of business / marketing promotion labelling, for VAT purposes, the price charged to the customer shall include VAT.

  • Consequently, the onus will be on the business to determine the correct amount of VAT payable.
  • The amount paid by the customer for the promotional good will therefore constitute the VAT inclusive consideration, regardless of whether the promotion is published as “VAT-free” or not.
  • As an exception to the above, the Taxable Person may declare prices as being exclusive of Tax in the following cases:
  1. The supply of Goods or Services for Export.
  2. Where the customer is a Registrant.


C) All tax invoices issued in respect of taxable promotional goods or services shall meet all the requirement set out in Article 59 of the Executive Regulation. Consequently, as prescribed in the Article, the seller is required to reflect the rate of tax, tax amount and the gross amount payable in AED for each taxable good or service supplied on the tax invoice.



As a consequence, 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.