All About the Designated Zones in UAE

In the UAE, VAT is charged on the supply of goods and services, except in certain areas known as “free zones.” Not all free zones are treated equally; only select free zones identified in a cabinet decision have unique VAT regulations. These special areas are referred to as “Designated Zones.

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Requirements for a Designated Zone:

To qualify as a territory outside the UAE for VAT purposes, a Designated Zone must meet the following criteria:

– A barrier must surround the zone.

– The zone must have security measures and a customs control unit to monitor the movement of people and goods.

– There must be clear rules for the processing, retrieval, and storage of goods within the zone.

– The zone’s operator must comply with all FTA rules and regulations.

Businesses in designated zones must maintain meticulous records and meet strict eligibility requirements.

List of Designated Zones in UAE:

Abu Dhabi:

– Abu Dhabi Airport Free Zone

– Free Trade Zone of Khalifa Port

– Khalifa Industrial Zone

– Al Butain International Airport Free Zone

– Al Ain International Airport Free Zone

Dubai:

– Dubai Cars and Automotive Zone (DUCAMZ)

– Jebel Ali Free Zone (North-South)

– Dubai Textile City

– Free Zone Area in Al Qusais

– Free Zone Area in Al Quoz

– Dubai Aviation City

– International Humanitarian City – Jebel Ali

– Dubai Airport Free Zone

Sharjah:

– Sharjah Airport International Free Zone

– Hamriyah Free Zone

Ajman:

– Ajman Free Zone

Umm Al Quwain (UAQ):

– UAQ Free Trade Zone on Sheikh Mohammed Bin Zayed Road

– UAQ Free Trade Zone in Ahmed Bin Rashid Port

Ras Al Khaimah:

– RAK Maritime City Free Zone

– RAK Free Trade Zone

– RAK Airport Free Zone

VAT Regulations in Designated Zones:

Service Provision Within Designated Zones:

Most services within a designated zone are subject to the standard VAT rate. However, services can be zero-rated if provided to someone outside the GCC states.

Goods Provision Within Designated Zones:

Supplies of goods within a designated zone are generally not subject to VAT unless used for private purposes. If goods are to be resold or used for production, the supply is exempt from VAT.

Transfer of Goods Into Designated Zones:

Goods transferred from outside the UAE to a designated zone are not subject to VAT.

Moving Goods from Mainland UAE to Designated Zones:

Such movements are not considered exports and are subject to VAT.

Commodities Movement Between Designated Zones:

Movements between designated zones are exempt from VAT if the transfer follows the GCC Common Customs Law and no alteration of goods occurs during transfer.

Importing Goods from Designated Zones:

Goods imported from a designated zone to the mainland UAE are subject to import VAT, but businesses can reclaim this VAT if the goods are the same as those bought in the designated zone.

Water and Energy Supplies in Designated Zones:

These supplies are not subject to VAT unless used for personal purposes.

Real Estate Availability in Designated Zones:

Real estate sales and leases in designated zones are treated as supplies of goods and are not subject to VAT.

 Tax and VAT Scenario in Designated Zones:

Tax Groups in Specified Areas:

Companies in designated zones can form tax groups with onshore businesses or businesses in other designated zones. Import VAT responsibilities apply if goods are imported from a designated zone to the mainland UAE.

Branches in Specific Areas:

Intra-entity transfers of goods within the same company are exempt from VAT, but transfers from a designated zone to the mainland are treated as regular imports.

Revenue from VAT in Designated Zones:

Businesses in designated zones can recover VAT if they make taxable supplies or goods that would be taxable in the UAE. They cannot recover VAT on expenses related to exempt supplies.

Start Your Business Through Unicorn Global Solutions:

Setting up a business in a UAE-designated zone can be complex. Unicorn Global Solutions offers expert assistance to help you navigate the process smoothly. Contact us today for a free consultation and start your dream business in UAE-designated zonesText us on WhatsApp or call us.

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