How will VAT apply in Free Zones ?


  • Overview

The VAT law has made provision for special treatment for what it calls are ‘Designated Zones’.

The Executive Regulations appear to make it clear that a designated zone will need to meet a series of criteria amongst which are:

  •  
  • The Designated Zone is a specific fenced geographic area and has security measures and Customs control in place to restrict entry and exit of individuals and movement of goods to and from the area.

  • The Designated Zone has internal procedures with respect to the method of keeping, storing and processing of goods.

  • The operator of Designated Zone to comply with such procedures (not yet specified) set by the authority.

 

It is apparent from the above criteria that this would not include any ‘unfenced’ free zone such as DMCC.

Below is the complete list of Designated Zones as per the Annex to the Cabinet Decision No (59) of 2017 No. Designated Zones.

 

Abu Dhabi

1. Free Trade Zone of Khalifa Port

2. Abu Dhabi Airport Free Zone

3. Khalifa Industrial Zone

 

Dubai

4. Jebel Ali Free Zone (North-South)

5. Dubai Cars and Automotive Zone (DUCAMZ)

6. Dubai Textile City

7. Free Zone Area in Al Quoz

8. Free Zone Area in Al Qusais

9. Dubai Aviation City

10. Dubai Airport Free Zone

 

Sharjah

11. Hamriyah Free Zone

12. Sharjah Airport International Free Zone

 

Ajman

13. Ajman Free Zone

No. Designated Zones (Umm Al Quwain)

14. Umm Al Quwain Free Trade Zone in Ahmed Bin Rashid Port

15. Umm Al Quwain Free Trade Zone on Shaikh Mohammad Bin Zayed Road

 

Ras Al Khaimah

16. RAK Free Trade Zone

17. RAK Maritime City Free Zone

18. RAK Airport Free Zone

 

Fujairah

19. Fujairah Free Zone

20. FOIZ (Fujairah Oil Industry Zone)

 

Acquisition of goods within a designated zone for incorporation into another unconsumed good located within the same designated zone will not be subject to UAE VAT. The Executive Regulation specifies that the place of supply of services is within the UAE if the place of supply is within the designated zone and, in effect, aligns the VAT treatment of service entities operating within designated zones to similar onshore entities within the UAE.

 

Check out Is VAT Charged on exports 

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