UAE Designated Zones
Special VAT treatment for designated free zones.
UAE Designated Zones
What is a Designated Zone?
A Designated Zone is a specific, fenced-off area in the UAE that is designated by a Cabinet Decision as being outside the territory of the UAE for the purposes of VAT. To maintain this status, these zones must follow strict security and customs controls to monitor the movement of goods.
2. VAT Treatment of Goods
Trading goods within or between Designated Zones often carries significant tax advantages:
- Tax-Free Transfers: The transfer of goods between two Designated Zones is generally not subject to VAT, provided the goods are not used or altered during the process.
- Imports into Designated Zones: Goods arriving into a Designated Zone from outside the UAE are typically not treated as an "Import" into the State for VAT purposes until they leave the zone and enter the local UAE market.
- Compliance: Businesses must strictly comply with established procedures for keeping and moving goods. Failure to follow these conditions can result in Administrative Penalties.
3. VAT Treatment of Services
Unlike goods, the supply of services within a Designated Zone is generally treated the same as services supplied within the UAE mainland. This means:
- Standard VAT rules usually apply to services unless specifically exempted or zero-rated under other provisions of the law.
- The Place of Supply for most services remains the UAE, making them subject to the standard 5% VAT rate.
4. Key Operational Rules
- Place of Supply: For VAT purposes, a supply is only considered to have occurred "outside the State" if it is made within a Designated Zone that meets all the criteria set by the Executive Regulation.
- Consumption: If goods are supplied within a Designated Zone for private use or consumption, they are typically treated as being supplied within the UAE and are therefore subject to VAT.
- Customs Oversight: Operations within these zones are closely tied to Customs Legislation to ensure that all goods entering or exiting the zone are properly documented for tax and duty purposes.
Feature | Treatment in Designated Zones |
|---|---|
Status | Treated as outside the UAE for VAT purposes (for goods) |
Supply of Goods | Often 0% or outside the scope of VAT |
Supply of Services | Generally subject to standard 5% VAT |
Goods Transfers | Tax-free between two Designated Zones |
Penalties | Applicable for non-compliance with zone procedures |
List of Designated Zone
- Abu Dhabi
- Free Trade Zone of Khalifa Port
- Abu Dhabi Airport Free Zone
- Khalifa Industrial Zone (KIZAD)
- Al Ain International Airport Free Zone
- Al Butain International Airport Free Zone
- Dubai
- Jebel Ali Free Zone (North-South)
- Dubai Cars and Automotive Zone (DUCAMZ)
- Dubai Textile City
- Free Zone area in Al Quoz
- Free Zone Area in Al Qusais
- Dubai Aviation City
- Dubai Airport Free Zone (DAFZA)
- International Humanitarian City – Jebel Ali
- Dubai CommerCity
- Sharjah
- Hamriyah Free Zone
- Sharjah Airport International Free Zone (SAIF Zone)
- Ajman
- Ajman Free Zone
5. Umm Al Quwain
- Umm Al Quwain Free Trade Zone in Ahmed Bin Rashid Port
- Umm Al Quwain Free Trade Zone on Sheikh Mohamed Bin Zayed Road
6. Ras Al Khaimah
- R AK Free Trade Zone (RAK FTZ)
- RAK Maritime City Free Zone
- RAK Airport Free Zone
- Al Hamra Industrial Zone
- Al Ghail Industrial Zone – Free Zone
- Al Hulaila Industrial Zone – Free Zone
7. Fujairah
- Fujairah Free Zone
- Fujairah Oil Industry Zone (FOIZ)