UAE Issues VAT Guidance on Compensation Type Payments, Profit Margin Scheme, and Labor Accommodation

The UAE Federal Tax Authority (FTA) has recently issued guidance addressing certain value added tax (VAT) matters. These are summarized as follows:

Compensation Type Payments

This guidance clarifies the treatment of compensation-type payments, including that where a payment is not consideration for a supply, no VAT is due. Some of the main points include:

• A contractual payment to compensate for losses (liquidated damages), such as pre-agreed payments for damages due to termination of a …