Picture this: You walk into a retail store, see something you like at what seems like a reasonable price, and when you get to checkout, the cashier tells you the price goes up 5% for ‘VAT’. If that has happened to you, you’re not alone.

In this article, we explain the VAT rules in uae, clarify whether businesses can actually show the prices untaxed, and point out the tactical and strategic implications that follow.

When the General Rule Doesn’t Apply

The VAT-inclusive price rule is a general principle, but the VAT Executive Regulation under the UAE VAT law specifies a few exceptional circumstances where businesses may or must display a price exclusive of VAT.

For example, Article 27 permits a business to display the price exclusive of VAT when supplying goods or services for export in circumstances where it clearly states the exclusion. Likewise, businesses may display prices exclusive of VAT when supplying VAT-registered customers, provided that such exclusion is clearly stated.

Additionally, Article 48(1) of the VAT law states that businesses must display prices exclusive of VAT when supplying ‘concerned goods and services’ in the circumstances where it is subject to the Reverse Charge Mechanism.

Lastly, Article 48(3) of the UAE VAT law obligates businesses to display a price exclusive of VAT when supplying crude or refined oil, unprocessed or processed natural gas, or pure hydrocarbons that are subject to the Reverse Charge.

General Rule under VAT Rules in UAE: Displayed Prices Must Include VAT

The UAE tax law governs how businesses should treat VAT in prices displayed and advertised, when Article 38 of Federal Decree-Law No. 8 of 2017 on Value Added Tax (and its amendments) (the “UAE VAT law“) is read with Article 27(1) of Cabinet Decision No. 52 of 2017.

On the Executive Regulation of the VAT Law (and its amendments) (the “VAT Executive Regulation”), there is a clear general principle that any business should advertise or publish their prices for taxable supplies on a VAT-inclusive basis, with specific consideration being given to Dubai VAT guidelines.

Broad Interpretation of Displayed Prices under UAE VAT Law

Although the law specifically references “displayed” or “advertised” prices, it appears that the Federal Tax Authority (FTA) interprets the rule broadly to include any prices specified in private agreements.

This approach likely comes from the understanding that if you have a contract price, that price is still considered “displayed” to the extent it is only shared with one other recipient. Article 80(2) of the uae vat law supports that approach.

Therefore, unless a specific exemption applies, businesses are required to include VAT in all displayed or advertised prices in relation to taxable supplies.

The legislative policy rationale for this rule is two-pronged. There is the obvious rationale of being transparent, and then there is the policy rationale that protects consumers by ensuring that customers understand the price they are being charged and the final price they are expecting to pay, subject to Dubai VAT guidelines.

Cocnlusion

The VAT rules in the UAE require businesses to display RMAs for taxable supplies on a VAT-inclusive basis. This provides consumers with clarity, so they cannot be surprised at the point of sale.

While this is the general rule that applies broadly, even to prices in private agreements. There are specific exceptions where prices can be, or under certain circumstances must be, displayed exclusive of VAT. Imports, exports of goods, supplies of goods to other VAT-registered businesses, and goods supplied under the Reverse Charge Mechanism are examples of such exceptions.

Understanding these rules (including the Dubai guidelines), are designed to help businesses comply with the VAT rules, at the same time as making informed pricing decisions.

Having said that, contact Khairallah Advocates & Legal Consultants and benefit from our free 30-min legal consultation.

*Disclaimer: our blogs, law updates, and FAQ’s are freely distributed for educational purposes and to showcase recent updates and regulations in the UAE’s framework.

If you have any questions and need assistance, contact us at our number or book an appointment online