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Decoding the VAT Exempted Free Zones in UAE

The Federal Tax Authority has recently announced 20 designated zones which would be free from 5% VAT implemented. These designated zones would be special zones for VAT purposes too. VAT is imposed on goods and services imported or supplied into UAE. Although these zones are a part of the UAE territory, for VAT purposes, they would be treated as outside the UAE. This means that the supply is not taking place in the UAE and hence the VAT would not be applicable.
The following are the exempted free zones

Abu Dhabi: Free Trade Zone of Khalifa Port; Abu Dhabi Airport Free Zone; and Khalifa Industrial Zone

Ajman: Ajman 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; and Dubai Airport Free Zone

Fujairah: Fujairah Free Zone; Fujairah Oil Industry Zone (FOIZ)

Ras Al Khaimah: RAK Free Trade Zone; RAK Maritime City Free Zone; RAK Airport Free Zone

Sharjah: Hamriyah Free Zone; Sharjah Airport International Free Zone. Get in touch with us for Sharjah Free Zone Company Formation assistance.

Umm Al Quwain: Umm Al Quwain Free Trade Zone in Ahmed Bin Rashid Port; Umm Al Quwain Free Trade Zone on Sheikh Mohammed Bin Zayed Road

These specific zones are fenced geographic areas that have controls in place to monitor the entry and exit of goods and individuals. The supply of goods from one designated zone to another or within the zone shall not be subject to VAT if the formalities are followed. However, medical equipment don’t fall under this category.

Goods that arrive from outside the UAE to the designated zones are not charged VAT as they are not treated as importing into the UAE. Goods coming to the designated zone from the UAE is not an export for VAT purposes, hence would not have zero-rated VAT.

If the goods are transferred between the designated zones and if the goods or parts of it are not used, released or altered during the transfer, they will not be subject to VAT. Goods not for consumption will be treated as outside the scope of VAT. The transfer of goods between designated zones should be however done in accordance with the rules and regulations.

Feel free to call us today if you have any queries on these VAT free zones.

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