The FTA (Federal Tax Authority) of United Arab Emirates has declared three new UAE free zones – exempt from the VAT (value-added tax), which adds them to the VAT free designated zones list. After the latest edition, the designated zones in the UAE stand at 23. Considering the taxation services, VAT in UAE was implemented at the beginning of 2018; however, these areas are out of the UAE VAT scope. An area that fulfills the specific eligibility conditions according to the 2017’s Federal Decree Law #8 is considered as a designated zone and will be certainly regarded as out the VAT scope.
There are some newly added free zones to the list that are given below:
- International Humanitarian City – Jebel Ali, Dubai
- Al Bateen Executive Airport Free Zone, Abu Dhabi
- Al Ain International Airport Free Zone
Also, it’s been mentioned that there will not be any VAT applied to the transactions that take place within the designated zones.
VAT Implementation in UAE Designated Zones
As it’s already mentioned above that there are 23 designated zones in UAE – out of these 23, two are located in Sharjah, eight are located in Dubai, two are located in Umm Al Quwain (UAQ) and Fujairah, one in Ajman, three are in RAK (Ras Al Khaimah), and five are located in Abu Dhabi.
Federal Tax Authority of UAE announces the list of designated zones – though, at this time, there are 10 free zones under-construction in UAE and more than 45 free zones across the UAE, which makes it highest in the world. There are almost 30 free zones in Dubai right now and the largest one is International Humanitarian City in Dubai.
Central Bank reported, UAE made 19.5% exports last year, as Dh225.5 billion worth exports were recorded by the UAE free zones in 2017. Plus, the exemption from VAT treatment is still expected to upsurge the export more in coming time. Companies that are located within the free zone can still avail VAT benefits for goods – products that are supplied not to be used inside the country since these transactions are out the VAT scope.
If new free zones that are under-construction meet the criteria, as suggested by the UAE VAT law, they might be added to the designated zones list. The UAE cabinet also highlighted that designated zones can be modified, added, and removed from the list.
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