Delivery app discount VAT: platform-funded vs restaurant-funded promotions

Face-value vouchers are a means of payment and do not reduce the value. Commission on each order carries its own 5% VAT.

Article 39 of the VAT Law reduces the value of a supply for discounts given before or after the date of supply. It leaves the conditions to the Executive Regulation. Article 28(2) of the Executive Regulation sets two:

1. the customer has benefited from the reduction in price; and
2. the supplier funded the discount.

On a delivery app where the restaurant is the supplier of the food, as is usual where the app acts as a disclosed agent under Article 9 of the VAT Law, this splits promotions into two kinds:

• Restaurant-funded: the restaurant agreed to bear the discount and its settlement is reduced accordingly. The customer pays less and the restaurant receives less, so output VAT is calculated on the lower amount.
• Platform-funded: the app pays part of the price for the customer as its own marketing. The customer pays less, but the restaurant's consideration under Article 34 is still the full menu price, partly from the customer and partly from the platform. Output VAT stays on the full price.

Co-funded promotions are split in the same proportions. Settlement statements usually show the restaurant and platform contributions on separate lines. Map them before you post anything.

The VAT Law defines a voucher as an instrument that gives the right to receive goods or services against the value stated on it, or a right to a discount (Article 1). Several rules follow.

• Face-value vouchers and gift cards. Selling a voucher for its face value is not a supply (Article 7(1)). The voucher is a means of payment, and the supply is taxed when the food is bought. Under Article 28(4) of the Executive Regulation, a voucher used to pay is ignored in working out any discount, so the restaurant accounts for VAT on the full price.
• Vouchers issued free. The same paragraph makes an exception where the voucher was given for no consideration. A free promo code funded by the restaurant therefore reduces the value of the order.
• Vouchers sold below face value. If the supplier sold the voucher for less than its stated value, the discount is the difference (Article 28(5)).
• No fixed value, no voucher. Article 28(6) excludes instruments whose redeemable value is not identifiable when issued.

App-wide promo codes paid for by the platform follow the platform-funded rule: no reduction for the restaurant. The voucher calculation page covers single- and multi-purpose vouchers generally.

A dish is listed at AED 105 including VAT (AED 100 + AED 5). The app runs 30% off, so the customer pays AED 73.50 in each case.

• Restaurant-funded (100%): the restaurant receives AED 73.50 for the food. VAT = 73.50 x 5 / 105 = AED 3.50.
• Platform-funded (100%): the restaurant receives AED 73.50 from the customer plus AED 31.50 from the app = AED 105. VAT = AED 5.00.
• Co-funded 50/50: the restaurant bears AED 15.75 and the app AED 15.75. Consideration = 105 - 15.75 = AED 89.25. VAT = 89.25 x 5 / 105 = AED 4.25.

Commission is a separate supply from the app to the restaurant. Using an illustrative 20% rate on the AED 100 tax-exclusive menu value, commission is AED 20 + AED 1 VAT. If the agreement charges commission on the discounted value, it would be AED 14 + AED 0.70 on AED 70. Read the commission base in your contract. It changes your cost but not the output VAT on the food.

Across 1,000 such orders, treating platform-funded promotions as restaurant-funded understates output VAT by AED 1,500 (AED 1.50 per order).

Commission is the platform's own supply to you. Where its tax invoice shows 5% UAE VAT and the platform's TRN, a registered restaurant can recover that VAT as input tax. If an app ever bills you from abroad without VAT, account for the reverse charge instead. Do not net commission against sales. Sales carry output VAT on the agreed consideration, and commission is an expense with input VAT.

Watch these lines on the statement:

• Marketing or ad contributions for sponsored listings or campaign participation are a charge for the platform's service. They are not a discount on the food.
• Free-delivery promotions paid for by the restaurant are usually a charge from the platform for delivery. They are not a reduction in the price of the meal. Check how the app invoices it.
• Refunds and cancellations charged back to the restaurant reduce the sale and its output VAT for that order.
• Penalties for late preparation or wrong items are a cost. They are not a sales reduction.

For the journal entries and weekly payout matching, see Talabat, Keeta and Careem payout reconciliation.

• Keep each promotion's written terms from the app showing the funding split. The banner on the app does not show it.
• Tag orders in your POS by promotion code so output VAT can be computed on the right consideration.
• Reconcile the platform's gross order value, restaurant-funded discounts and platform-funded discounts to the statement every cycle.
• Calculate output VAT from what you actually receive from the customer and the platform together. Do not use the customer's price, and do not use the net payout.
• Check the commission tax invoice monthly and claim input VAT only from it.
• Where an app buys and resells food in its own name, the analysis changes under Article 9(2). The app then makes the supply to the customer and you supply the app, so reassess before applying this page.

Getting the funding split wrong is a common reason restaurant VAT returns fail to reconcile to platform statements in an FTA audit. If earlier returns understated output VAT, correct them by voluntary disclosure or in a later return, depending on the size of the error.

Two conditions decide everything on this page. Under Article 28(2) of the Executive Regulation, a discount reduces the value of the supply only where the customer benefited and the supplier funded the discount. If the platform funds the promotion, the restaurant's consideration is still the full menu price, paid partly by the customer and partly by the app, so output VAT stays on the full price. Co-funded promotions split in the same proportions as the funding. A face-value voucher used to pay is ignored for discount purposes, while a voucher issued free by the restaurant can reduce the value. Commission is the platform's own supply: claim its 5% VAT as input tax from the platform's tax invoice, and never net it against sales.