Treatment of VAT in Free zones of UAE

The VAT in UAE was introducedfrom 1 January 2019 and applies to those supplies of goods and services whichtake place within the territorial boundaries of the UAE. As in the case ofgoods and services supplied within free zones in the UAE, the rules of VAT areapplicable to undergo a certain change.

Free zones are definedas those areas which are specifically designed to promote internationalbusinesses in the UAE by providing attractive incentives to foreign investorsand businesses. In the UAE, there are currently more than 37 Free Zones suchas:

  • Jebel Ali Free Zone
  • Dubai Airport Free Zone
  • Dubai Cars and Automotive Zone and many more

As per UAE VAT law andExecutive Regulations, not all Free zones are ‘VAT Free Zones’ and only thoselisted in a Cabinet Decision are eligible for the special VAT treatment. TheseFree Zones are referred to as Designated Zones for VAT purposes,according to Cabinet Decision No. 59 of 2017

Few supplies occurring within the Designated Zones will not invite the standard rate of VAT i.e. 5% under circumstances mentioned in VAT regulations. This is only in the case of a supply of goods. However, suppliers of services in the designated zone will be subjected to the usual VAT rate at 5%. It’s important to understand the conditions which businesses need to follow for the VAT-free supply of goods between the Designated Zones as prescribed by UAE VAT Executive Regulations.

Following are theconditions which are mandatory to consider any UAE free zone as a DesignatedZone to

  1. It should be enclosed within a specific fenced geographical area.
  2. It should have security measures and customs controls in place for monitoring the entry and exit of individuals and goods to and from the area.
  3. There should be laid out internal procedures related to the method of keeping, storing and processing goods within the Designated Zone.
  4. The operator of the Designated Zone should show support or comply with the procedures laid down by the Federal Tax Authority (FTA) of UAE.

If any free zone nolonger fulfills the above conditions, it cannot be then treated as a designatedzone. It will be considered and treated as a part of the UAE And general VATrules will be applicable to such free zones.

Below are few examplesof Free zones which are designated zones:

Jebel Ali Free Zone (North-South)

Dubai Cars and Automotive Zone (DUCAMZ)

Free Zone Area in Al Quoz

Umm Al Quwain Free Trade Zone in Ahmed BinRashid Port

FOIZ (Fujairah Oil Industry Zone)

Khalifa Industrial Zone

As per the registrationfor VAT is considered, these businesses within the Designated Zone have toregister, report and account for VAT as per the UAE laws. In case of failing toregister for VAT within the due date, a penalty of AED 20,000/- will be leviedas per the UAE Federal Cabinet Decision No.40.

The VAT in UAE was introducedfrom 1 January 2019 and applies to those supplies of goods and services whichtake place within the territorial boundaries of the UAE. As in the case ofgoods and services supplied within free zones in the UAE, the rules of VAT areapplicable to undergo a certain change.

Free zones are definedas those areas which are specifically designed to promote internationalbusinesses in the UAE by providing attractive incentives to foreign investorsand businesses. In the UAE, there are currently more than 37 Free Zones suchas:

  • Jebel Ali Free Zone
  • Dubai Airport Free Zone
  • Dubai Cars and Automotive Zone and many more

As per UAE VAT law andExecutive Regulations, not all Free zones are ‘VAT Free Zones’ and only thoselisted in a Cabinet Decision are eligible for the special VAT treatment. TheseFree Zones are referred to as Designated Zones for VAT purposes,according to Cabinet Decision No. 59 of 2017

Few supplies occurring withinthe Designated Zones will not invite the standard rate of VAT i.e. 5% under circumstancesmentioned in VAT regulations. This is only in the case of a supply of goods. However supplies ofservices in the designated zone will be subjected to usual VAT rate at 5%. It’simportant to understand the conditions which businesses need to follow for theVAT-free supply of goods between the Designated Zones as prescribed by UAE VATExecutive Regulations.

Following are theconditions which are mandatory to consider any UAE free zone as a DesignatedZone to

  1. It should be enclosed within a specific fenced geographical area.
  2. It should have security measures and customs controls in place for monitoring the entry and exit of individuals and goods to and from the area.
  3. There should be laid out internal procedures related to the method of keeping, storing and processing goods within the Designated Zone.
  4. The operator of the Designated Zone should show support or comply with the procedures laid down by the Federal Tax Authority (FTA) of UAE.

If any free zone nolonger fulfills the above conditions, it cannot be then treated as a designatedzone. It will be considered and treated as a part of the UAE And general VATrules will be applicable to such free zones.

Below are few examplesof Free zones which are designated zones:

Jebel Ali Free Zone (North-South)

Dubai Cars and Automotive Zone (DUCAMZ)

Free Zone Area in Al Quoz

Umm Al Quwain Free Trade Zone in Ahmed BinRashid Port

FOIZ (Fujairah Oil Industry Zone)

Khalifa Industrial Zone

As per the registrationfor VAT is considered, these businesses within the Designated Zone have toregister, report and account for VAT as per the UAE laws. In case of failing toregister for VAT within the due date, a penalty of AED 20,000/- will be leviedas per the UAE Federal Cabinet Decision No.40.

Consult Shuraa Tax Consultants andAccountants to get assured and accurate help on the VAT laws related to theFree Zones in the UAE. We are a group of FTA approved tax agents in Dubai with a goal toprovide accurate services of VAT in UAE (VAT registration and implementation, Tax compliance & VATReturn Filing). Contact us to get complete assistance and guidance on the VAT registration in UAE. 

Consult Shuraa Tax Consultants and Accountants to get assured and accurate help on the VAT laws related to the Free Zones in the UAE. We are a group of FTA approved tax agents in Dubai with a goal to provide accurate services of VAT in UAE (VAT registration and implementation, Tax compliance & VAT Return Filing). Contact us to get complete assistance and guidance on the VAT registration in UAE. 

The VAT in UAE was introducedfrom 1 January 2019 and applies to those supplies of goods and services whichtake place within the territorial boundaries of the UAE. As in the case ofgoods and services supplied within free zones in the UAE, the rules of VAT areapplicable to undergo a certain change.

Free zones are definedas those areas which are specifically designed to promote internationalbusinesses in the UAE by providing attractive incentives to foreign investorsand businesses. In the UAE, there are currently more than 37 Free Zones suchas:

  • Jebel Ali Free Zone
  • Dubai Airport Free Zone
  • Dubai Cars and Automotive Zone and many more

As per UAE VAT law andExecutive Regulations, not all Free zones are ‘VAT Free Zones’ and only thoselisted in a Cabinet Decision are eligible for the special VAT treatment. TheseFree Zones are referred to as Designated Zones for VAT purposes,according to Cabinet Decision No. 59 of 2017

Few supplies occurring withinthe Designated Zones will not invite the standard rate of VAT i.e. 5% under circumstancesmentioned in VAT regulations. This is only in the case of a supply of goods. However supplies ofservices in the designated zone will be subjected to usual VAT rate at 5%. It’simportant to understand the conditions which businesses need to follow for theVAT-free supply of goods between the Designated Zones as prescribed by UAE VATExecutive Regulations.

Following are theconditions which are mandatory to consider any UAE free zone as a DesignatedZone to

  1. It should be enclosed within a specific fenced geographical area.
  2. It should have security measures and customs controls in place for monitoring the entry and exit of individuals and goods to and from the area.
  3. There should be laid out internal procedures related to the method of keeping, storing and processing goods within the Designated Zone.
  4. The operator of the Designated Zone should show support or comply with the procedures laid down by the Federal Tax Authority (FTA) of UAE.

If any free zone nolonger fulfills the above conditions, it cannot be then treated as a designatedzone. It will be considered and treated as a part of the UAE And general VATrules will be applicable to such free zones.

Below are few examplesof Free zones which are designated zones:

Jebel Ali Free Zone (North-South)

Dubai Cars and Automotive Zone (DUCAMZ)

Free Zone Area in Al Quoz

Umm Al Quwain Free Trade Zone in Ahmed BinRashid Port

FOIZ (Fujairah Oil Industry Zone)

Khalifa Industrial Zone

As per the registrationfor VAT is considered, these businesses within the Designated Zone have toregister, report and account for VAT as per the UAE laws. In case of failing toregister for VAT within the due date, a penalty of AED 20,000/- will be leviedas per the UAE Federal Cabinet Decision No.40.

Consult Shuraa Tax Consultants andAccountants to get assured and accurate help on the VAT laws related to theFree Zones in the UAE. We are a group of FTA approved tax agents in Dubai with a goal toprovide accurate services of VAT in UAE (VAT registration and implementation, Tax compliance & VATReturn Filing). Contact us to get complete assistance and guidance on the VAT registration in UAE. 

Consult Shuraa Tax Consultants and Accountants to get assured and accurate help on the VAT laws related to the Free Zones in the UAE. We are a group of FTA approved tax agents in Dubai with a goal to provide accurate services of VAT in UAE (VAT registration and implementation, Tax compliance & VAT Return Filing). Contact us to get complete assistance and guidance on the VAT registration in UAE. 

The VAT in UAE was introducedfrom 1 January 2019 and applies to those supplies of goods and services whichtake place within the territorial boundaries of the UAE. As in the case ofgoods and services supplied within free zones in the UAE, the rules of VAT areapplicable to undergo a certain change.

Free zones are definedas those areas which are specifically designed to promote internationalbusinesses in the UAE by providing attractive incentives to foreign investorsand businesses. In the UAE, there are currently more than 37 Free Zones suchas:

  • Jebel Ali Free Zone
  • Dubai Airport Free Zone
  • Dubai Cars and Automotive Zone and many more

As per UAE VAT law andExecutive Regulations, not all Free zones are ‘VAT Free Zones’ and only thoselisted in a Cabinet Decision are eligible for the special VAT treatment. TheseFree Zones are referred to as Designated Zones for VAT purposes,according to Cabinet Decision No. 59 of 2017

Few supplies occurring withinthe Designated Zones will not invite the standard rate of VAT i.e. 5% under circumstancesmentioned in VAT regulations. This is only in the case of a supply of goods. However supplies ofservices in the designated zone will be subjected to usual VAT rate at 5%. It’simportant to understand the conditions which businesses need to follow for theVAT-free supply of goods between the Designated Zones as prescribed by UAE VATExecutive Regulations.

Following are theconditions which are mandatory to consider any UAE free zone as a DesignatedZone to

  1. It should be enclosed within a specific fenced geographical area.
  2. It should have security measures and customs controls in place for monitoring the entry and exit of individuals and goods to and from the area.
  3. There should be laid out internal procedures related to the method of keeping, storing and processing goods within the Designated Zone.
  4. The operator of the Designated Zone should show support or comply with the procedures laid down by the Federal Tax Authority (FTA) of UAE.

If any free zone nolonger fulfills the above conditions, it cannot be then treated as a designatedzone. It will be considered and treated as a part of the UAE And general VATrules will be applicable to such free zones.

Below are few examplesof Free zones which are designated zones:

Jebel Ali Free Zone (North-South)

Dubai Cars and Automotive Zone (DUCAMZ)

Free Zone Area in Al Quoz

Umm Al Quwain Free Trade Zone in Ahmed BinRashid Port

FOIZ (Fujairah Oil Industry Zone)

Khalifa Industrial Zone

As per the registrationfor VAT is considered, these businesses within the Designated Zone have toregister, report and account for VAT as per the UAE laws. In case of failing toregister for VAT within the due date, a penalty of AED 20,000/- will be leviedas per the UAE Federal Cabinet Decision No.40.

Consult Shuraa Tax Consultants andAccountants to get assured and accurate help on the VAT laws related to theFree Zones in the UAE. We are a group of FTA approved tax agents in Dubai with a goal toprovide accurate services of VAT in UAE (VAT registration and implementation, Tax compliance & VATReturn Filing). Contact us to get complete assistance and guidance on the VAT registration in UAE. 

Consult Shuraa Tax Consultants and Accountants to get assured and accurate help on the VAT laws related to the Free Zones in the UAE. We are a group of FTA approved tax agents in Dubai with a goal to provide accurate services of VAT in UAE (VAT registration and implementation, Tax compliance & VAT Return Filing). Contact us to get complete assistance and guidance on the VAT registration in UAE. 



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