Handing out free samples or promotional gifts in the UAE can create a VAT charge: goods given away for no consideration are a deemed supply taxed at their market value. The Executive Regulation's Article 5 exceptions keep most marketing giveaways out of the net — up to AED 500 of samples or commercial gifts per recipient in a rolling 12-month period, plus an AED 2,000 cap on total deemed-supply output tax per person. Getting these thresholds right is what keeps a marketing budget from generating an unexpected VAT bill.
When giving goods away becomes a taxable supply
Article 11(3) of Federal Decree-Law No. 8 of 2017 treats goods on which input tax was recovered but that are used outside the business — which is how the law classifies goods given away without consideration, such as free samples and gifts — as a deemed supply (Federal Decree-Law No. 8 of 2017, uaelegislation.gov.ae). The taxable person must account for output tax at 5% of the market value of the goods — not what they cost to produce.
The exceptions in Article 5
Article 5 of Cabinet Decision No. 52 of 2017 (the VAT Executive Regulation, as amended) lists the cases where no deemed supply arises (Executive Regulation of FD-L 8 of 2017, uaelegislation.gov.ae):
- input tax was not recovered on the goods given away;
- the goods given are supplied as samples or commercial gifts and the value supplied to each recipient in a 12-month period does not exceed AED 500;
- the total output tax payable on all deemed supplies to each person in a 12-month period is less than AED 2,000;
- for supplies between government entities or charities, the 12-month output-tax cap is AED 250,000.
The per-recipient test is cumulative and rolling: the 12-month period is the period preceding the end of the month in which the supply is made. AED 550 of samples to the same customer inside 12 months puts the whole amount, not just the excess, back into the deemed-supply net — unless the AED 2,000 output-tax cap in the same period still absorbs it.
Thresholds at a glance
| Giving away | Deemed supply? | Condition |
|---|---|---|
| Samples or commercial gifts ≤ AED 500 / recipient / 12 months | No | Article 5(1) — value test per recipient |
| Anything above AED 500 / recipient, output tax < AED 2,000 / person / 12 months | No | Article 5(2)(a) — output-tax cap absorbs it |
| Above both thresholds | Yes — 5% output tax on market value | Applies to the value given in the period |
| Goods where input VAT was not recovered | No | FD-L Art. 12(1) — input tax not recovered |
| Supplies between government entities or charities | No | Output tax ≤ AED 250,000 in 12 months |
How to account for it
Where the threshold is exceeded, self-account for 5% output tax on the market value in the VAT return for the period in which the goods left the business. Keep a recipient-level log — who received what, when and at what value — because the 12-month tests are rolling and the FTA can request records for at least five years under the Decree-Law's record-keeping rules (Federal Decree-Law No. 8 of 2017, uaelegislation.gov.ae).
FAQ
Do free samples always trigger VAT in the UAE? No. Samples or commercial gifts with a total value of up to AED 500 per recipient in a 12-month period are not a deemed supply, and even above that the Article 5 output-tax cap (AED 2,000 per person in 12 months) can still absorb the charge.
Is the AED 500 limit per gift or per customer? Per recipient, measured across all goods given to that person in the rolling 12-month period preceding the month of the supply.
What happens if I exceed the gift threshold? You account for 5% output VAT on the market value of the goods given in that period and record it in the corresponding VAT return.
Finanshels provides VAT filing and VAT registration, including deemed-supply checks — see also VAT on employee expenses and benefits.
