The UAE Ministry of Finance has confirmed that Designated Zones listed by the UAE Cabinet will not be subject to value-added tax (VAT) — with some exceptions.
The Ministry explained: “Although Designated Zones are part of the UAE territory, for VAT purposes, they are treated as being outside the UAE. VAT is imposed on goods and services supplied or imported in the UAE. This means that if a supply is treated as not taking place in the UAE, then UAE VAT should not be charged, with some exceptions noted.”
The Ministry noted that Designated Zones — a specific fenced geographic area that has security measures and Customs controls in place to monitor entry and exit of individuals and movement of goods to and from the area — differed from Free Zones.
The Designated Zones were defined in Cabinet Decision No. (59) of 2017 on Designated Zones for Federal Decree Law No. (8) of 2017. See the list below.
The Ministry statement said that place of supply is generally determined by looking at the location of the goods, activities or the parties to a transaction, and that if the place of supply is in a Designated Zone it may be outside the scope of VAT.
However, certain items originating in Designated Areas would be treated as if they originated in the UAE for tax purposes, and would therefore be subject to VAT. These are electricity, water and all forms of energy, and goods sold for use or consumption.
Goods arriving in a Designated Zone from outside the UAE would not be treated as if they had been imported into the UAE. Goods transferred between Designated Zones would not be subject to VAT if the transfer was in accordance with the UAE Customs Law and no part of the goods were released, used or altered during the transfer,
If goods are moved between Designated Zones, the Federal Tax Authority (FTA) could request the owner to provide a guarantee of VAT if conditions were not met.
Sale of goods between Designated Zones will not be subject to VAT provided they are not for consumption, the Ministry noted.
Designated Zones in Abu Dhabi:
1. Free Trade Zone of Khalifa Port
2. Abu Dhabi Airport Free Zone
3. Khalifa Industrial Zone
Designated Zones in Dubai:
1. Jebel Ali Free Zone (North-South)
2. Dubai Cars and Automotive Zone (DUCAMZ)
3. Dubai Textile City
4. Free Zone Area in Al Quoz
5. Free Zone Area in Al Qusais
6. Dubai Aviation City
7. Dubai Airport Free Zone
Designated Zones in Sharjah:
1. Hamriyah Free Zone
2. Sharjah Airport International Free Zone
Designated Zones in Ajman:
1. Ajman Free Zone
Designated Zones in Umm Al Quwain:
2. Umm Al Quwain Free Trade Zone in Ahmed Bin Rashid Port
3. Umm Al Quwain Free Trade Zone on Shaikh Mohammad Bin Zayed Road
Designated Zones in Ras Al Khaimah:
1. RAK Free Trade Zone
2. RAK Maritime City Free Zone
3. RAK Airport Free Zone
Designated Zones in Fujairah:
1. Fujairah Free Zone
2. FOIZ (Fujairah Oil Industry Zone)
Source "Gulf News"