VAT on Compensation Type Payments in UAE

As explained in the Federal Decree Law No. 8 of 2017 on Value Added Tax (“VAT Law”), VAT is imposed on payments that are in return of taxable supplies of goods or service. As per the VAT Law, the term “taxable supplies” refers to supplies of goods or services inside the state that are not including exempt supplies. This means, that in order to charge VAT on a payment received, the payee must supply in return to the payer goods or services worth of what the payee received. If no supply of goods nor services is made in return to the payment received by the payee, then the payee is not permitted to charge VAT on the payment amount received.




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