FTA announces list of Designated Zones in the UAERoemarie Ann Periabras
FTA announces list of Designated Zones in the UAE
A Designated Zone is determined by the UAE’s Federal Cabinet to be outside the UAE for VAT purposes
The UAE’s Cabinet on Wednesday finalized designated free zones for application the Federal tax-law No (8) relating to Value Added Tax.
An unofficial translation of the Cabinet decision lists 20 free zones across the country as designated free zones under special treatment under VAT law.
The Cabinet decision is effective from January 1, 2018.
According to the UAE VAT law, a designated zone is an area specified by the Cabinet decision.
A designated zone that meets the conditions specified in the Executive Regulation of VAT law shall be treated as being outside the State.
Article (51) of the VAT law specifies that transfer of goods between designated zones are 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).
The UAE Cabinet has the authority to amend the list of designated zones.
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.
The 20 designated zones selected from 45 free zones in the country qualifies for transfer of goods between them not be subject to tax.
“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,” said Afridi & Angell, in a recent note.
The movement or supply of goods into a designated zone from within the UAE will not be considered an export of such goods from the UAE, and as such will not receive zero-rating which an export outside of the GCC would receive.
Many entities operating in these zones provide services as their primary taxable supplies.
The Executive Regulation specifies that the place of supply of services is within the UAE if the place of supply is within the designated zone and, in effect, aligns the VAT treatment of service entities operating within designated zones to similar onshore entities within the UAE.
Here’s the complete list of Designated Zones as per the Annex to the Cabinet Decision No (59) of 2017 No. Designated Zones.
- Free Trade Zone of Khalifa Port
- Abu Dhabi Airport Free Zone
- Khalifa Industrial Zone
- 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
- Hamriyah Free Zone
- Sharjah Airport International Free Zone
- Ajman Free Zone
No. Designated Zones (Umm Al Quwain)
- Umm Al Quwain Free Trade Zone in Ahmed Bin Rashid Port
- Umm Al Quwain Free Trade Zone on Shaikh Mohammad Bin Zayed Road
Ras Al Khaimah
- RAK Free Trade Zone
- RAK Maritime City Free Zone
- RAK Airport Free Zone
- Fujairah Free Zone
- FOIZ (Fujairah Oil Industry Zone)
Source: Gulf News