Designated Zones VAT Guide

VAT Guide | VATGDZ1 | July 2018

1. Introduction 

1.1. Overview 

1.1.1.Short brief 

VAT has been introduced with effect from 1 January 2018 in the UAE. As a general consumption tax on the supply of goods and services, it applies to those supplies which take place within the territorial area of the UAE.

Historically, Free Zones have been excluded from the territorial scope of the UAE. For VAT purposes, this is not automatically the case. Only those Free Zones listed in a Cabinet Decision qualify for special VAT treatment and that special VAT treatment has certain limitations. These nominated Free Zones are known as Designated Zones for VAT purposes.

Designated Zones are:

• subject to strict control criteria;
• required to have security procedures in place to control the movement of goods and people to and from the Designated Zone;
• required to have Customs procedures to control the movement of goods into and out of the Designated Zone; and 
• treated as being outside the territory of the UAE for VAT purposes for certain supplies of goods.

The effect for businesses operating in Designated Zones will be that many supplies of goods will be outside the sc...