The UAE offers many lucrative options to attract foreign direct investment, and the designated zones are also a strategic way to appeal to entrepreneurs worldwide. These designated zones are the powerful branches of the country’s economic ecosystem, contributing substantially to its development and worldwide recognition.
Established to diversify the economy from oil dependency, these designated zones play crucial roles in promoting international commerce, foreign investment, and financial progress.
VAT is applied to goods and services in the UAE. However, the government also created a few free zones to leverage VAT. Not all free zones are excluded from VAT.
For VAT purposes, the authorities have listed a few Designated Zones in the UAE that are treated as outside the territorial premise.
Identifying the Designated Zones in the UAE
Free zones are not considered VAT-free, and deliveries of goods and services will typically attract standard VAT. Some free zones, however, qualify as designated zones under the provisions of the Federal Decree Law on VAT and its Executive Regulations.
The specified zones are stated in a cabinet decision. However, even if a zone is designated, it must meet the following conditions to be considered a territory outside the UAE:
- Zones must have a surrounding fence.
- The zone must have its security measures and customs control unit to monitor the movement of individuals and goods in and out of the zone.
- There must be well-defined regulations for the storing, retrieving, and processing goods within the zone.
- Zone operators must comply with all the rules and regulations put forth by the FTA.
Businesses operating in designated zones are subject to strict qualifying criteria and must keep thorough records.
The sale, purchase, and transport of goods between designated zones will not attract VAT. Such goods will be VAT-applicable if exported from the UAE or used as a taxable supply.
The delivery of products between defined zones will not be subject to VAT when:
- No commodities are discharged during the movement between the specified zones.
- The GCC common customs law governs the transfer of commodities.
- If the transfer criteria are not satisfied, the owner must show proof of monetary assurance to the Authority.
- The flow of products from and into the UAE mainland: A 5% VAT is required for both the movement of products from the UAE mainland to a designated zone and the transfer of goods from a designated zone into the UAE mainland.
List of the Designated Zones in the United Arab Emirates
Abu Dhabi
- Free Trade Zone of Khalifa Port
- Abu Dhabi Airport Free Zone
- Khalifa Industrial Zone
- 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
- International Humanitarian City – Jebel Ali
Sharjah
- Hamriyah Free Zone
- Sharjah Airport International Free Zone
Ajman
- Ajman Free Zone
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
Ras Al Khaimah
- RAK Free Trade Zone
- RAK Maritime City Free Zone
- RAK Airport Free Zone
Fujairah
- Fujairah Free Zone
- Fujairah Oil Industry Zone (FOIZ)
Tax groupings in certain zones
A business established in a designated zone can join a tax group with one or more onshore firms or businesses established in other designated zones. If goods are supplied from one member of the tax group to another, an import VAT will be applied to the tax group, resulting in goods being imported from a designated zone into the mainland UAE.
Branches in designated zones
The movement of goods between business divisions, such as a branch and headquarters, is an intra-entity reimbursement; thus, this transfer is VAT-exempt. However, in case of a transfer of goods coming into the mainland from a specified zone, this would be considered normal imports and would incur tax.
Countries like the UAE top the business growth chart by attracting entrepreneurs with business-friendly policies. The UAE's designated zones are the key reasons for economic growth. Establishing a venture in tailored free zones is neither easy nor difficult. All you need is expert advice and professional support. We at Markai Corporate Services commit to providing you with tailored business solutions and helping you thrive in the UAE's designated zones.
Contact MarkAI Corporate Services, your trusted Business Setup Consultant, today! Our team of Company Setup Consultants will guide you through a smooth and seamless business setup in the UAE, ensuring you're ready to capitalize on the multiple opportunities this dynamic market has to offer.
Reach out to us at - +971 50 479 8992 or mcs-info@mark-ai.com to discover how we can help you capitalize on the multiple opportunities that the UAE has to offer.
