TL;DR
- Before executing a sales concession, align its business rationale, authority, contract, tax documents, payment recipient and accounting records.
- Keeping the original contract and invoice values while making a separate off-record payment creates a conflicting evidence trail and should trigger escalation.
- Where UAE VAT adjustment conditions apply, a Tax Credit Note may need to be issued within 14 days from the date the adjustment event occurs, subject to the latest official publication.
- Payments to a third-party legal entity require full verification. An instruction to pay an individual is exceptional and cannot be approved on the strength of one email.
When a customer asks your business to sign a side agreement outside the formal records, keep the invoice at its original value while providing an offline rebate, or pay a nominated third party, the immediate commercial questions are often the amount and the effect on closing the deal. The decisive issue is different: can the same commercial arrangement remain consistent across corporate authority, the contract, tax documents, the flow of funds and accounting records?
This guide provides a pre-execution review path. It helps your business distinguish a legitimate discount, a post-transaction price adjustment, a commission and an unsupported off-record payment—and decide when to obtain missing documents, pause execution, or refer the matter to legal or tax advisers.
How Should You Classify a Customer’s Discount or Rebate Request?
Labels do not change the substance of a transaction. A “discount,” “rebate,” “commission” and “refund” can involve different contractual relationships, documents and tax treatment.
- Pre-transaction discount: The parties change the consideration before the supply occurs. The contract, quotation and invoice should reflect the final price.
- Post-transaction price adjustment or refund: The original transaction value has already been established and is later changed for a genuine commercial reason. The business must determine whether the contract and tax documents also need to change.
- Commission or channel fee: The recipient provides an independent service to the business. The payment should be supported by an appropriate agreement, evidence of service, approval and documentation.
- Off-record payment: The contract and invoice retain their original values, while a separate payment is requested for the customer, an individual or another third party without a supportable service or price-adjustment basis.
The reviewer should establish five facts: who made the request, who benefits, why it arises, which transaction it relates to, and who will ultimately receive the money. If the arrangement depends on hiding its real terms, renaming the payment or bypassing account verification, execution should stop.
⚠️ A small amount does not remove the need to classify the transaction. Paying first and seeking approval later allows a sales commitment to take effect before corporate authority has been established—and creates a fund flow that may be difficult to explain.
How Can a Sales Commitment Pass Corporate Authority and Contract Review?
Sales teams may discuss commercial terms, but those terms become binding only within the company’s authority framework. Your business should define quotation authority, discount thresholds, authority to sign side agreements, refund approval rights and the person responsible for approving exceptions. External communications about terms outside those limits should state that they are “subject to internal approval.”
A side agreement should, at minimum, refer back to the original contract, identify the matter being changed, specify its conditions for effectiveness, name the relevant parties, state the amount or calculation method, and carry an authorised signature. The business should then reconcile it with delivery facts, invoices, payment arrangements and accounting treatment. If any part of the evidence still records the previous commercial position, the result may be a conflict across contract interpretation, audit and tax reporting.
💡 Our recommendation: make “request intake—authority check—transaction classification—document adjustment—tax treatment—payment release” the fixed sequence. A sales email can evidence a request or negotiation, but it cannot replace formal approval or signatory authority.
Questions concerning contractual validity, electronic signatures, dispute resolution or regulated-industry requirements should be confirmed by legal counsel in the relevant jurisdiction.
When Does a Discount or Refund Require UAE VAT Document Adjustments?
UAE Value Added Tax (VAT) treatment should follow the actual change to the transaction. The current consolidated text is the Federal Decree-Law No. 8 of 2017 on Value Added Tax and amendments, published by the UAE Federal Tax Authority in November 2025 and incorporating the amendments under Federal Decree-Law No. 16 of 2025, subject to the latest official publication.
Article 61 sets out circumstances for adjusting Output Tax, including a subsequent change in the consideration for a supply. Article 62(2) further provides that when a VAT registrant has charged Output Tax exceeding the amount properly chargeable on that supply, and a circumstance listed in Article 61(1) occurs, the registrant must issue a Tax Credit Note in accordance with the law within 14 days from the date that circumstance occurs. (Source: UAE Federal Tax Authority, Federal Decree-Law No. 8 of 2017 on Value Added Tax and amendments, November 2025.) This remains subject to the latest official publication.
The 14-day rule is not a general deadline for every refund or commercial dispute. Your business must first confirm the supplier’s VAT registration status, whether the matter falls within a statutory adjustment circumstance, and whether the Output Tax previously calculated exceeds the amount properly chargeable. A price change before invoicing, an adjustment after invoicing and a refund after payment should also be treated separately. The contract, invoice, Tax Credit Note, VAT return and bank records must form a continuous trail. These requirements remain subject to the latest official publication.
A non-VAT-registered party, cross-border service, disbursement, commission or third-party payment requires analysis based on the actual transaction rather than automatic application of the rule above.
How Should You Handle a Payment Recipient That Differs from the Contracting Party?
A mismatch between the recipient and the contracting party directly affects the evidence trail, but the correct response depends on the type of recipient and the commercial arrangement.
Employee or Other Individual Accounts
Your business should treat the use of an employee’s personal account to receive or make company payments as an internal-control red line. If a customer asks for a rebate to be paid to an employee, shareholder, relative or another individual, pause the payment and verify the ultimate beneficial owner, commercial purpose, contractual relationship, authority chain, tax documents and account ownership. The review should also address Anti-Money Laundering (AML), sanctions and conflict-of-interest risks.
An authorisation letter for an individual does not automatically resolve these issues. The arrangement should proceed only if professional review confirms that it is lawful, consistent with the commercial facts, permitted under company policy and supported by a complete audit trail—and then only under the resulting formal approval.
Third-Party Legal Entity Accounts with a Genuine Commercial Basis
A contracting party may appoint another legal entity or institution to receive funds under a genuine arrangement such as collection agency or group treasury centralisation. Before releasing payment, verify the authority of the appointing party, the recipient’s identity, account ownership, the underlying transaction, the contract or side agreement, the invoice and the tax treatment. An email or authorisation letter is only one part of the evidence.
How Can a Six-Point Consistency Check Determine the Execution Decision?
Before approving payment, test the same commercial concession across six interfaces:
| Review area | What must be confirmed | Warning sign |
|---|---|---|
| Business rationale | The reason for the adjustment genuinely relates to the underlying transaction | The beneficiary or payment purpose cannot be explained |
| Authorised party | The commitment, signature and payment fall within the relevant authority limits | Sales commits first and management approves later |
| Contract documents | The main contract and side agreement are consistent | A request to keep the agreement unfiled or hide its terms |
| Tax documents | The invoice, Tax Credit Note and VAT treatment connect properly | The invoice remains unchanged while the difference is paid separately |
| Payment recipient | Account ownership and legal relationship can be verified | The recipient is not a transaction party and the basis is unclear |
| Accounting records | Entries reflect the transaction’s true economic substance | Another label is used to conceal the nature of the payment |
The outcome should fall into one of four categories:
- Execute: All six areas align, approvals are complete, and the documentary and account trail is clear.
- Execute after obtaining documents: The transaction is genuine, but signatory authority, tax documents, service evidence or account records are missing.
- Pause and escalate: Documents conflict, real terms are being hidden, the recipient is exceptional, or AML, sanctions or conflict-of-interest red flags arise.
- Decline: The business cannot establish a lawful commercial purpose and consistent evidence, or professional review determines that the arrangement is unacceptable.
Frequently Asked Questions
Q: The Customer Wants a 5% Rebate. Can We Process It Directly Because the Amount Is Small?
The amount may affect the approval level, but it does not change the review requirements. First determine whether the payment is a price adjustment, refund, commission or unsupported payment. Then verify authority, documentation and the recipient.
Q: After Signing a Side Agreement, Can the Original Invoice Remain Unchanged?
That depends on the VAT adjustment conditions. If a circumstance under Article 61(1) occurs and the Output Tax already calculated exceeds the amount properly chargeable, the Tax Credit Note requirement in Article 62(2) may apply. The filing and documentation treatment should be checked against the current rules, subject to the latest official publication.
Q: Is an Authorisation Letter Enough If the Customer Nominates an Individual to Receive the Rebate?
No. A payment instruction naming an individual is exceptional. Pause the payment and verify the beneficiary, commercial rationale, contractual relationship, authority, tax documents and account ownership before assessing AML, sanctions and conflict-of-interest risks.
Q: Sales Has Already Agreed by Email. Must the Company Perform?
Check the salesperson’s agency or signatory authority, the contract terms and the applicable law. Internally, the company should promptly distinguish negotiated terms from an approved commitment, while legal counsel manages the customer’s expectations where necessary.
What Should Your Business Do Before Execution?
- Record the customer’s request, amount, beneficiary, commercial rationale and timing through a single intake process.
- Verify sales authority and authority to sign the side agreement; obtain approval before communicating terms outside those limits.
- Ask legal counsel to review the contract and authority, and finance to review VAT documents, applicable deadlines and the payment path.
- For third-party and individual accounts, verify identity, account ownership, the ultimate beneficial owner and the commercial basis.
- Before payment, reconcile the contract, tax documents, bank instruction and accounting entry, and retain the reasons for escalation or refusal.
If your business is assessing a side agreement, discount, rebate or third-party payment, gather the customer request, main contract, side agreement, invoice, Tax Credit Note, payment instruction and approval records for a pre-execution consistency review.
Schedule a 30-minute complimentary assessment
Last updated: September 2026. This content is for informational purposes only and does not constitute legal or tax advice. For professional consultation, please contact the MIRISE team.