The Federal Tax Authority (FTA) revealed 20 designated free zones in the UAE that would be exempt from VAT which was recently introduced in the country. This move has brought a major relief and clarity for the companies operating in the free trade zones. With welcoming policies like these, UAE can expect increased growth as more organizations look for business setup in Dubai free zone.
VAT Free Designated Zones
As per the announcement, these 20 free trade zones would be generally considered to be outside of the UAE when it comes to the application of VAT. According to the UAE’s VAT law, the transfer of goods between these designated zones is now tax-free. However, such goods must not have been used or altered during the transfer process. Another point to consider is that such transfer must be according to the rules for customs suspension per GCC Common Customs Law. In a case where the conditions for transfer of goods are not met, the FTA may require a guarantee. This guarantee should be equivalent to the tax liability of the goods to be transferred.
The zone managers are required to follow internal procedures for keeping, storing, and processing of goods. The purchase of goods inside a free zone for incorporation into another unconsumed product within the same zone will not attract VAT. However, the movement of supply of goods into a zone from the rest of the country will not be covered under this rule and attract VAT.
There are total 45 free trade zones in UAE and out of these 27 are present in Dubai. From the 20 designated free trade zones, 7 are present in Dubai. This means 75% of the free zones will still have VAT applicable to them. Luckily, some of the most important free zones like JAFZA and DAFZA are included in the list of designated free zones. This relaxation has led to many newer businesses to consider company formation in JAFZA.
In addition to this, the Cabinet has also approved zero VAT on the supply of certain medications and medical equipment which are registered with the Ministry of Health (MoH). However, this does not include services related to medical equipment. Both these decisions will work retroactively from 1 January 2018.
List of Free Zones by FTA
Here is the complete list of Free Zones announced by the FTA as per the Annex to the Cabinet Decision No. (59) Of 2017:
- Abu Dhabi:
- Free Trade Zone of Khalifa Port
- Abu Dhabi Airport Free Zone
- Khalifa Industrial Zone
- Dubai:
- 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
- Sharjah:
- Hamriyah Free Zone
- Sharjah Airport International Free Zone
- Ajman:
- Ajman Free Zone
- 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:
- Fujairah Free Zone
- FOIZ (Fujairah Oil Industry Zone)
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