I believe, such incentives for achieving the sales targets can be considered as reduction in the purchase cost where the manufacturer issues a credit note (with the particulars as prescribed in Article 60 of the ER) in the name of the distributor. Correspondingly, the distributor should also reduce the input VAT availed based on the invoices issued by the manufacturer. Where it is difficult to correlate the credit note to previously issued tax invoices, one may consider to provide discount on the subsequent purchases. You can refer a detailed guidance published by GAZT on such arrangements and draw parallels. https://www.vat.gov.sa/sites/default/files/2019-01/VAT_Business_Promotions_Guide_English.pdf

Thanks Dear Akshaya for detail explanation. If in such a case where goods are being imported from ROW & DFZ( Jafza) and tax treatment applied under RCM hence in such a case we should reverse the RCM upto the Incentive Values ? Secondly Manufacturer is not issuing any Credit Note due to Out of Scope of UAE VAT Laws. I need further your valuable adivce on this matter as per above given details.

Incentives are taxable if the retailer receives reimbursement (e.g., manufacturer's rebate, employee discounts). Incentives are not taxable if the retailer does not receive reimbursement from any source.

You mean to say cash back discount is taxable while Incentives are not taxable.