Abu Dhabi, UAEThursday 20 September 2018

VAT in UAE: Ministry of Finance explains designated free zones 

Although designated free zones are part of the UAE territory, for VAT purposes they are treated as being outside the Emirates, the Ministry of Finance says

Khalifa Port in Abu Dhabi is one of 20 Designated Zones exempt from VAT. Christopher Pike / The National
Khalifa Port in Abu Dhabi is one of 20 Designated Zones exempt from VAT. Christopher Pike / The National

The Ministry of Finance has clarified some details on designated free zones for the purposes of VAT.

According to the law and Cabinet decisions, a designated free zone is a specific fenced geographic area that has security measures and customs controls in place to monitor entry and exit of individuals and movement of goods to and from the area, the ministry said in a report carried by WAM.

Although designated free zones are part of the UAE territory, for VAT purposes, they are to be treated as being outside the UAE.

VAT is imposed on goods and services supplied or imported into the UAE. This means that if a supply is treated as not taking place in the UAE, then levies should not be charged.


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The Ministry said the place of supply is generally determined by looking at the location of the goods, activities or the parties to a transaction.

However the VAT Executive Regulation said certain types of supplies should be treated as if they are taking place in the UAE:

  • provision of water services
  • All forms of energy goods sold for use or consumption

Goods that arrive into a designated free zone from outside the UAE are not treated as imported into the UAE. Therefore, no VAT is charged on such arrival of the good, the ministry added. That said, a transfer or sale of goods into a Designated Zone from a place in the UAE which is not a Designated Zone is not an export for VAT purposes, and therefore will not give rise to zero-rated VAT treatment.

Transfer and movement of goods

The Ministry said the transfer of goods between designated zones will not be subject to VAT if both of the following conditions are met:

  • The goods, or parts of the goods, are not released, used or altered during the transfer between the Designated Zones
  • The transfer is undertaken in accordance with the rules for customs suspension according to GCC Common Customs Law

Where goods are moved between Designated Zones, the Federal Tax Authority may request the owner of the goods to provide a guarantee in respect of the VAT in case the conditions for the movement of goods are not met.

The sale of goods between designated free zones will be treated as outside the scope of the UAE VAT, if the goods are not for consumption.


Read more: 20 free zones told they are exempt from levy

The 20 Designated Zones

Abu Dhabi

Free Trade Zone of Khalifa Port

Abu Dhabi Airport Free Zone

Khalifa Industrial Zone


Jebel Ali Free Zone

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


Hamriyah Free Zone

Sharjah Airport International Free Zone


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 Free Zone

Fujairah Oil Industry Zone (FOIZ)