Accounting for Gift Vouchers in UAE Travel & Hospitality: Unlock Compliance and Cash Flow in 2025

In the UAE's booming tourism scene, where Dubai's luxury spas and Abu Dhabi's desert resorts draw millions, gift vouchers are a golden ticket for revenue and loyalty. A AED 500 spa credit at Jumeirah or a AED 1,000 desert tour bundle from a DMC? They sell fast, promising quick cash flow. But beneath the glamour, voucher accounting under IFRS 15 and 5% VAT can be a minefield. Missteps risk FTA audits (fines up to AED 20,000 + 200% penalties), deferred revenue distortions, or lost breakage income.

Whether you're a UAE hotelier bundling Burj Khalifa experiences or a travel agent offering Eid promotions, this guide demystifies vouchers: sold-for-cash vs. promotional, revenue timing, VAT traps, and best practices. Backed by FTA clarifications (VATP040, March 2025), we'll equip you to treat vouchers as profit engines, not liabilities. For deeper dives, link to our U.S./UK guides, Antravia's global expertise at your service.

Why Vouchers Matter in UAE Travel & Hospitality

UAE's hospitality sector hit AED 100B+ in 2024, with vouchers fueling 15-20% of off-peak sales (per DTCM data). But under Federal Decree-Law No. 8/2017 (VAT Law), issuance isn't taxable—redemption triggers 5% on goods/services. IFRS 15 defers revenue until control transfers (redemption), while breakage (unredeemed funds) becomes income post-expiry.

Get it wrong? Overstated liabilities inflate balance sheets; ignored breakage forfeits revenue. Done right? Vouchers boost working capital without FTA scrutiny, vital for seasonal agents/hotels navigating Expo 2030 prep.

1. Vouchers Sold for Cash: Hotels, Spas, and Experiences

Prepaid vouchers (e.g., AED 500 Burj Al Arab afternoon tea) create deferred revenue under IFRS 15 until the performance obligation is met.

a. Single-Purpose vs. Multi-Purpose Vouchers

FTA VATP040 classifies based on known supply/tax at issuance:

• Single-Purpose Voucher (SPV): Predictable redemption (e.g., AED 300 spa treatment at 5% VAT). VAT accrues at sale if rate is fixed.

• Multi-Purpose Voucher (MPV): Flexible (e.g., AED 1,000 hotel card for rooms [5% tourism fee + VAT] or meals [5% VAT]). VAT deferred to redemption.

b. Accounting Entries for Single-Purpose Vouchers

Defer full amount; VAT at issuance (Article 7(1) VAT Law).

At sale (AED 500 voucher, 5% VAT): Dr Cash AED 525 Cr Deferred Revenue AED 500 Cr VAT Payable AED 25

At redemption: Dr Deferred Revenue AED 500 Cr Revenue AED 500 (No additional VAT as already paid.)

c. Accounting Entries for Multi-Purpose Vouchers

Full deferral; VAT at redemption.

At sale (AED 500 voucher): Dr Cash AED 500 Cr Deferred Revenue AED 500

At redemption (e.g., spa at 5% VAT): Dr Deferred Revenue AED 500 Cr Revenue AED 476.19 Cr VAT Payable AED 23.81

Use PMS like Opera to track—unredeemed MPVs can bloat liabilities, skewing KPIs like ADR.

d. Breakage (Unused Vouchers)

IFRS 15.53-59 mandates estimating unredeemed portions (e.g., 15% historical rate) and recognizing proportionally when "remote" (post-12-24 month expiry). For AED 50,000 pool at 15% breakage: Dr Deferred Revenue AED 7,500 Cr Revenue AED 7,500

VAT on breakage? None if unredeemed (no supply). Document policies (e.g., "Valid 12 months") for FTA audits.

2. Promotional Vouchers: Travel Agent Discounts & Giveaways

" AED 100 off your next Dubai tour" vouchers aren't deferred—they're incentives reducing net revenue (IFRS 15 variable consideration).

a. Accounting Treatment

No entry at issue; recognize at redemption.

At redemption (AED 2,000 tour with AED 100 voucher): Dr Cash AED 1,900 Dr Sales Discount (Marketing Expense) AED 100 Cr Revenue AED 2,000

Classify as contra-revenue for gross metrics; expense if promotional.

b. VAT Treatment

No VAT on issuance (no consideration). Tax net at redemption (5% on AED 1,900 = AED 95). FTA treats as price reduction.

c. Financial Impact

Estimate likely redemptions upfront (IFRS 15.50-54); disclose if material (e.g., "Discounts AED 50k, 3% of sales"). No liability unless cash-refundable.

3. Disclosures & Best Practices

Under IFRS 15 disclosures and FTA requirements:

• Balance Sheet: Unredeemed balances as deferred revenue.

• Notes: Breakage methodology (e.g., "15% based on 2-year data"); promotional volumes.

• Tips: Integrate with ERP (e.g., SAP for hotels); audit expiry quarterly; train staff on VAT-inclusive invoicing.

For single-purpose vouchers (SPV), such as a spa treatment, VAT timing is at sale, revenue recognition is deferred until redemption, and the example for an AED 500 voucher shows cash of AED 525, a liability of AED 500, and VAT of AED 25.

For multi-purpose vouchers (MPV), such as a hotel card, VAT timing is at redemption, revenue recognition is deferred until redemption, and the example for an AED 500 voucher shows cash of AED 500, with revenue of AED 476.19 and VAT of AED 23.81 at use.

For promotional vouchers, VAT timing is at redemption on the net amount, revenue recognition is an immediate discount, and the example for a AED 2,000 booking with a AED 100 discount shows revenue of AED 2,000 minus the AED 100 discount.

4. Why get it right? Risks & Rewards

In UAE's VAT-mature regime (post-2018), errors trigger FTA voluntary disclosures (up to 200% penalties) or audits distorting NOI. But compliant vouchers? They enhance liquidity (e.g., AED 100k+ breakage/year for mid-size hotels) and support Expo 2030 growth.

For agents/hotels, vouchers aren't just sales—they're strategic assets when accounted precisely.

Ready to voucher-smart your books? Antravia UAE specializes in IFRS 15/VAT for travel pros. Book a free consultation at antravia.ae.

References

• FTA. "VAT on Vouchers" (VATP040 Public Clarification). March 20, 2025. https://tax.gov.ae/en/taxes/vat/vat.public.clarifications/vatp040.aspx

• PwC. "Vouchers and their UAE VAT Implications." September 13, 2023 (updated 2025). https://www.pwc.com/m1/en/media-centre/articles/vouchers-and-their-uae-vat-implications.html

• UAE VAT Law. Federal Decree-Law No. 8/2017, Article 7(1). https://uaelegislation.gov.ae/en/legislations/1227

• IFRS Foundation. IFRS 15: Revenue from Contracts with Customers (UAE adoption). https://www.ifrs.org/issued-standards/list-of-standards/ifrs-15-revenue-from-contracts-with-customers/

• DTCM. "Dubai Tourism Economic Impact 2024." https://www.visitdubai.com/en/business-in-dubai/tourism-statistics

Disclaimer

This article is for general informational purposes only and does not constitute legal or financial advice. Regulations and fees can change; always verify details directly with the Dubai Department of Economy and Tourism before applying. Antravia AE does not currently offer regulated company formation or tax filing services in the UAE.