Yesterday, the Federal Tax Authority published a new Cabinet Decision No.(59) with the List of all the Designated Zones in UAE which are following special rules for VAT application.
Article (51) of the Federal Decree-Law No. (8) of 2017 on Value Added Tax specifies that transfer of goods between designated zones is tax free.
According to the Executive regulations of the tax law a designated Zone is a specific fenced geographic area and has security measures and customs controls in place to monitor entry and exit of individuals and movement of goods to and from the area. Additionally a designated zone shall have internal procedures regarding the method of keeping, storing and processing of goods and the operator of the designated zone complies with the procedures set by the Federal Tax Authority (FTA).
According to tax experts acquisition of goods within a designated zone for incorporation into another unconsumed good located within the same designated zone will not be subject to UAE VAT.
Goods may also be transferred between Designated Zones without being subject to tax if the goods are not used or altered during the transfer process, and the transfer is undertaken in accordance with the rules for customs suspension per GCC Common Customs Law. The FTA may require a guarantee equivalent to the tax liability of the goods to be transferred in case the conditions for the transfer of goods between Designated Zones are not met.
All other 25 free zones in UAE are subject to VAT as per the new current law applied to the Mainland.
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List of Designated Zones
Annex to the Cabinet Decision No (59) of 2017
1. Free Trade Zone of Khalifa Port
2. Abu Dhabi Airport Free Zone
3. Khalifa Industrial Zone
4. Jebel Ali Free Zone (North-South)
5. Dubai Cars and Automotive Zone (DUCAMZ)
6. Dubai Textile City
7. Free Zone Area in Al Quoz
8. Free Zone Area in Al Qusais
9. Dubai Aviation City
10. Dubai Airport Free Zone
11. Hamriyah Free Zone
12. Sharjah Airport International Free Zone
13. Ajman Free Zone
Umm Al Quwain
14. Umm Al Quwain Free Trade Zone in Ahmed Bin Rashid Port
15. Umm Al Quwain Free Trade Zone on Shaikh Mohammad Bin Zayed Road
Ras Al Khaimah
16. RAK Free Trade Zone
17. RAK Maritime City Free Zone
18. RAK Airport Free Zone
19. Fujairah Free Zone
20. FOIZ (Fujairah Oil Industry Zone)