Ever since the GCC VAT framework was designed, one of the biggest concerns for most businesses has been the “Free Zone VAT” even after the UAE VAT Law was announced. Businesses want to know about the VAT treatment of existing free zones and the VAT treatment of supplies entering and leaving the free zones.
Before understanding the treatment of VAT in free zones, let us first understand what are free zones in the UAE.
What free zones are there in the UAE?
Free zones, also known as free trade zones, are areas designed to promote international business in the UAE by providing 100% foreign business ownership. Free zones include alluring benefits like no
UAE nationals act as local partners/shareholders and are exempt from taxes such as customs duties and corporate taxes, personal income tax, import and export taxes, etc.
Designated areas are areas that meet the conditions stipulated in government decrees and are designated by a cabinet decision. Designated areas are treated as out-of-state for VAT purposes and supplies between designated areas are not subject to 5% VAT.
What are the conditions for designated areas?
For designated areas designated by Cabinet decision to be considered out-of-state and out-of-implementing country, the following conditions must be met:
Designated areas must be within a specific fenced geographic area
Security measures and customs controls should be in place to monitor the movement of individuals and goods into the area.
Internal procedures should be established to specify how items are stored, stored and disposed of in designated areas.
Operators in designated areas must comply with procedures established by the authorities.
The above are the conditions that must be met in designated areas. Companies located in these areas qualify if there is a change in the way they operate.
If a business no longer meets the requirements of a state, the business is deemed to be located within that state and is treated like a territory. Business
Emirates designated areas
Khalifa Port Abu Dhabi Free Trade Zone
Abu Dhabi Airport Free Zone
khalifa industrial area
Free Zone of Dubai Jebel Ali (North and South)
Dubai Automobile and Automobile Zone (DUCAMZ)
dubai textile city
Al Quoz Free Zone
Al Qusais Free Zone
dubai aviation city
dubai airport free zone
Sharjah Hamriyah Free Zone
Sharjah Airport International Free Zone
Ajman Ajman Free Zone
Umm Al Quwain Ahmed Bin Rashid Port Umm Al Quwain Free Trade Zone
Sheikh Mohammed bin Zayed Road
Umm Al Quwain Free Trade Zone
Ras Al Khaimah Free Trade Zone
Ras Al Khaimah Maritime City Free Zone
Ras Al Khaimah Airport Free Zone
Fujairah Fujairah Free Zone
FOIZ (Fujairah Oil Industrial Zone)
