VAT in UAE: List of Designated Zones in UAE with Impact on Transactions

UAE Cabinet Decision No 59 of 2017 approves the List of Designated Zone (DZ) for UAE VAT Law.

Summarizing the Key impact of VAT on transactions related with DZ.

All Free Zones are not being treated as DZ resulting that companies in the Free Zones except those declared as DZ are to be treated as onshore and same VAT rules applies as on Main Land (ML) companies.

DZ are to be treated outside the UAE for VAT (only for limited purpose) Tax Group can be formed between DZ and ML Companies

Specific Rules of Supply of Goods/ Service for Designated Zones:

Inter/ Intra DZ Trading of Goods – Out of Scope of VAT

Import of Goods – No RCM Export of Goods – Out of Scope

Goods from DZ to ML (Custom clearance by ML company) – RCM by ML

Goods from DZ to ML(Custom clearance by DZ company) – Subject to VAT.

Goods consumed within DZ – Subject to VAT

Goods from ML to DZ – Not Export subject to VAT

Import of Services – RCM

Services from ML to DZ – Not Export subject to VAT

Services inside the DZ – Subject to VAT

Electricity, Water, Fuel, Energy inside DZ – Subject to VAT

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