This Public Clarification clarifies the VAT treatment of compensation-type payments, determining when such a payment constitutes consideration for a supply. It explains that VAT is only due on payments made for a supply of goods or services, referencing the definitions in Article 1 and Article 2 of Federal Decree-Law No. 8 of 2017. The document provides examples, distinguishing between payments outside the VAT scope, like liquidated damages for loss or penalties for breaches, and payments that are consideration for a supply, such as charges for cancelling a service. It stresses that the substance of the transaction, not the payment's label, dictates the VAT liability.