Are you considering business opportunities in the UAE’s Designated Free Zones? Understanding VAT regulations in these zones is crucial for informed decision-making. This guide will provide you with essential insights into the VAT policies and advantages of setting up in these zones, ensuring you know everything necessary to get started.
What are Designated Zones?
A UAE VAT Designated Zone is an area defined by the Cabinet Decision as outside the UAE for Value Added Tax (VAT) purposes, aimed at providing tax incentives for businesses. To qualify as a designated zone, several criteria must be met:
- Gated Territories: Designated Zones must be fenced, with safety measures and customs controls to monitor the movement of goods and people.
- Internal Goods Processing Policy: There must be established procedures for the storage, maintenance, and processing of goods within the zone.
- Tax Compliance: Zone administrators must adhere to the regulations set by the Federal Tax Authority (FTA).
Understanding VAT Policies in UAE Designated Zones
Introduced on January 1, 2018, VAT is a general consumption tax applicable across the UAE. However, Designated Zones are treated differently:
- Goods transferred between and within Designated Zones are exempt from VAT, provided specific conditions are met.
- Goods exported from Designated Zones to overseas or imported are also not subject to VAT if proper controls and records are maintained.
- Transfers from the mainland or other free zones into a Designated Zone are subjected to the standard 5% VAT rate.
- Conversely, transfers from Designated Zones to the mainland or other free zones are treated as imports with VAT applied via the reverse charge mechanism.
However, these exemptions do not apply to services, which are taxed at 5% regardless of their provision location within the UAE, as services are harder to monitor and regulate.
VAT Registration Requirements for Businesses in Designated Zones
Investors and business owners operating within these zones must be aware of the VAT registration thresholds:
- Mandatory Registration: Required if taxable supplies exceed AED 375,000 over the past 12 months or are expected to exceed this amount in the next 30 days.
- Voluntary Registration: Available if taxable supplies or expenditures exceeded AED 187,500 in the previous 12 months or are expected to surpass this amount shortly.
Any individual (natural or legal) carrying on a business activity in the UAE and making taxable supplies should register for VAT based on the following threshold:
Complete List of Designated Free Zones in UAE
According to the Cabinet Decision No. 59, the following free zones as designated zones in the UAE.
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:
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
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)
Discover how setting up in a Designated Free Zone can transform your business. Contact Shuraa Business Setup today for comprehensive support in navigating the complexities of VAT and other regulations in Designated Free Zones.
Benefits of Setting Up in Designated Free Zones in UAE
Setting up in Designated Free Zones in the UAE offers numerous advantages including tax incentives, custom duty benefits, and streamlined logistics. These zones provide a conducive environment for growth-oriented businesses aiming to leverage the strategic location and state-of-the-art facilities.
Set Up Your Free Zone Company with Shuraa Business Setup Now!
Embarking on a business venture in one of the UAE’s Designated Free Zones? With Shuraa Business Setup, streamline your process from inception to full operational capability in a Designated Free Zone.
Our expert consultants will guide you through every step of the process — from business registration and understanding UAE VAT regulations to obtaining necessary approvals from authorities.
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