Designated zones in the UAE

What are designated zones?

    Designated zones are areas that are specified by the UAE cabinet to be outside of the state for VAT purposes. These territories are designated to offer incentives to businesses in these areas. A list of conditions should be met for this to happen:
  • Designated zones should be fenced off: When these territories are fenced off geographically, safety measures and customs controls are implemented to screen the entry and exit of people and products to and from the zone.
  • Designated zones should have an internal goods processing policy: An internal policy and methodology for storage and the process of goods.
  • Designated zones should be tax compliant: The admin of the designated zone should comply with the procedures set by the Federal Tax Authority.

Keep in mind that not all free zones are considered designated zones. 

What are the designated zones in the UAE?

    Dubai:
  • Free Zone Area in Al Qusais
  • Free Zone Area in al Quoz
  • Jebel Ali Free Zone
  • Dubai Aviation City
  • Dubai Textile City
  • Dubai Cars and Automotive Zone
  • Dubai Airport Free Zone
    Abu Dhabi
  • Abu Dhabi Airport Free Zone
  • Free Trade Zone of Khalifa Port
  • Khalifa Industrial Zone
    Sharjah
  • Sharjah Airport International Free Zone
  • Hamriyah Free Zone
    Fujairah
  • Fujairah Free Zone
  • Fujairah Oil Industry Zone
    Umm Al Quwain
  • Umm Al Quwain Free Trade
  • Umm Al Quwain Free Trade Zone on Sheikh Mohammed bin Zayed Road
    Ras Al Khaimah
  • Ras Al Khaimah Airport Free Zone
  • Ras Al Khaimah Maritime City Free Zone
  • Ras Al Khaimah Free Trade Zone

How is VAT applicable in UAE designated zones for goods?

    Designated zones that are located inside of the UAE and that are used for the trading of goods are dealt with as if they are located outside of the UAE.
  1. The supply of goods from and to the outside of the UAE: VAT won't be applicable to sales and purchases of goods that are transported within UAE designated zones. However, these goods will be under VAT when they are exported or used in the manufacturing of taxable supplies.
  2. The supply of goods between designated zones won't be under VAT when:
    • The goods are not used during the transfer between the designated zones.
    • The goods are not released during the transfer between the designated zones.
    • The transfer of goods happens under the rules of the GCC common customs law.
    • The ower of the goods provides proof of monetary guarantee to the Authority if the conditions of the transfer of the goods are not met.
  3. The supply of goods from and into the UAE mainland: A 5% VAT is mandatory for both the transfer of goods from the UAE mainland and into a designated zone or the transfer of goods from a designated zone and into the UAE mainland.

How is VAT applicable in UAE designated zones for services?

If the place of supply is within a designated zone, the place of supply of this service will be considered to be within the UAE. This means that services that are supplied from the mainland to a designated zone in the UAE or within the designated zone are under a 5% VAT.