Discounts in UAE aren’t always VAT free

Like any customer, I am delighted whenever I receive a discount from electronic retailers, restaurants, and movie theatres. But the tax consultant in me gets anxious when VAT is charged on the net discounted price.

- BY PANKAJ S JAIN Special to Gulf News

I wonder if the penalty risks of such a tax position could be discussed with the sellers.

Is VAT applicable only on the amount paid by end customers?

Many businesses assume that VAT is applicable only on the amount received from the end-customer. The UAE VAT laws do not mandate any such assumption.

The taxable amount includes all that is received or expected to be received for the supply. The taxable amount can flow both from buyer and third-party.

It is true that the taxable amount cannot exceed the amount actually received by a seller, but can certainly exceed the amount received from the buyer/customer. The differential amount relates to third-party considerations or subsidies directly linked to the price of the goods.

This fundamental tax position is similar to that of Europe and other countries.

Is VAT applicable on discounts offered to customers?