1. VAT Public Clarification VATP020 “VAT-free special offers”

The Federal Tax Authority  (“FTA”) has released Public Clarification VATP020 “VAT-free special offers” to remind taxpayers of their obligations under the UAE VAT legislation where goods or services are sold under certain promotional schemes. 

Retailers may often advertise promotions where the price for goods or services is discounted by the equivalent of the amount of VAT that would ordinarily be charged as offers that are “VAT free” or “the VAT is on us”.

UAE VAT registered retailers are reminded that all supplies of goods and services are subject to the standard rate of VAT at 5%, unless they qualify for the zero rate or exemption from VAT.  VAT should be accounted for as appropriate on payments received from customers in respect of the promotional goods and services and tax invoices issued in respect of these sales.

Retailers are advised to review their promotional materials to ensure that they do not use misleading language that appears to contravene the UAE VAT legislation. 

2. VAT Public Clarification VATP021 “VAT registration of sole establishments”

Public Clarification VATP021 “VAT registration of sole establishments” provides clarity on the VAT registration obligations of natural persons operating a number of sole establishments. 

Sole establishments are businesses owned and operated by natural persons and are not legally distinct from their owners.  Where a natural person owns a number of sole establishments, the sole establishments are not required to be registered separately for VAT.  The FTA has clarified that a single VAT registration in the name of the owner should be obtained.

Turnover from all the owner’s sole establishments should be considered when determining whether VAT registration thresholds have been breached.  Where a natural person is registered for VAT, all activities carried out by way of business by that person will be subject to VAT as appropriate.

The FTA advised that it will review the positions where owners of sole establishments obtained multiple VAT registrations in the past, and directly contact the taxpayers if any corrective action is required.

Should you have any queries with regard to VATP020 or VATP021, please get in touch with your usual KPMG contact, or any of the contacts below.