Numerous retailers are offering “VAT-free special offers” as promotions to entice prospective buyers to purchase goods or services within a promotional period.
Referring 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.
This Public Clarification clarifies the VAT treatment of promotions where the seller absorbs VAT on promotional goods. For purposes of this clarification, the term “promotional goods” refers to goods that are sold as part of a special promotion.
VAT registered businesses should not advertise taxable goods or services as free of VAT or sell such goods or services without accounting for 5% VAT, except where the supply qualifies for zero-rating.
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