Treatment of VAT in Free zones of UAE

 Free zones, also known as free trade zones, are designed to promote international businesses in the UAE, by providing the business owners 100% ownership of their business. However, all free zones are not VAT-free zones. A VAT free zone is called designated zones and the executive regulation prescribes the conditions in which a designated zone needs to partake.

So, what is the treatment of VAT in the free zones of UAE? Read on!

For commercial businesses: If the supply of goods is to and from the rest of the world (outside the UAE), then unless the goods are exported or used to manufacture taxable supplies (and sold to an individual located in Mainland) – VAT will not be charged. If the supply of goods is between designated zones in the UAE, and they are not altered, used, are as per GCC Common Customs Law and a monetary guarantee is provided – VAT will not be levied. If the supply of goods is to and from the UAE mainland, a 5% VAT will be applicable in both cases.

For service businesses: Services are anything apart from goods. The executive regulation specifies that the place of supply of services is to be considered in the state of UAE. So, whether the service is provided in the designated zones or Mainland – the standard rate of VAT at 5% will be charged. There is a bit of differential treatment when it comes to VAT on goods and services. Tax-free transactions are only allowed for the supply of goods within the designated zones provided the conditions are met, whereas for services - a 5% VAT will always be levied. So, when it comes to planning your tax strategy – it is best to get in touch with VAT Consultancy in Dubai to understand the impact of VAT on their business.

To understand more about VAT returns Dubai, and to help plan your tax strategy – get in touch with TRC Pamco, one of the best VAT consultants in UAE. They can assist you with your strategy and help you make the most out of your business.