The VAT treatment of services received in Designated Territories is different from the VAT treatment of goods purchased in Designated Territories in the UAE. For merchandise, purchases within the designated area and outside the state are considered out-of-state purchases. Similar benefits are not applicable for provision of services in designated zones.
This article looks at the VAT treatment of services received from designated territories in the following scenarios:
Services Received from Designated Territories
Services Received from the Mainland
Services Received from Outside the UAE
To learn more about Designated Territories, see Scheduled Territories VAT and UAE Free Zone VAT please.
Services received between and from designated zones
within the UAE are subject to 5% tax. This is because the location of services provided within the designated area is considered to be within the state.
Services received from the mainland in the United Arab Emirates
The provision of services from the mainland (within the state) to designated areas is taxable and the provision of services must be subject to 5% value added tax.
Services provided from outside the United Arab Emirates.
Services acquired from outside the UAE within the designated areas are subject to tax liability. The recipient of such services must take into account her VAT as part of the reverse charge mechanism and pay her VAT when submitting the VAT return.
Companies established within a designated area should be aware that they are subject to tax regardless of whether the services received are within the designated area or within the state (mainland). It should also be noted that services purchased from outside the state are subject to VAT on the reverse charge principle. This means that the recipient of such services will be required to pay the VAT and clear the VAT liability when filing her VAT return in the UAE.
You can also register for VAT Registration on our website: