Trading, import & export
Designated zones and VAT: a practical guide for traders
Some free zones are outside the VAT net for goods. Only some, and only for goods.
What a designated zone is
A designated zone is a free zone listed by Cabinet Decision as being treated as outside the UAE for VAT purposes on certain supplies of goods, provided it meets specific security and customs control conditions. Not every free zone is a designated zone, so the first step is to check the current list for your zone.
Goods within and between designated zones
Supplies of goods within a designated zone, or between designated zones, can fall outside the scope of VAT when the conditions are met, including that the goods are not consumed or used inside the zone. Records of where the goods are and how they move are what support the treatment.
Goods moving to the mainland
When goods leave a designated zone for the mainland, VAT is usually triggered, and the movement is generally treated like an import. A registered business will normally account for it under the reverse charge in its VAT return.
Services are different
The special treatment applies to goods. Services supplied in a designated zone, such as consultancy, rent or logistics services, are generally subject to VAT in the normal way.
Records to keep
- Stock records by location
- Customs documents for every movement in or out of the zone
- Evidence that goods were not used or consumed in the zone
- Sales documents showing the customer's location
Recent result
AED 36,000
of AED 40,000 in penalties waived for an IFZA free-zone company. We prepared the waiver request; the investor paid AED 4,000.
Not sure where you stand?
Send us your last VAT return or your trade licence. A chartered accountant will tell you what is in order and what needs attention. No obligation.