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What you need to know now
A free-zone licence and VAT Designated Zone status are different concepts. Special goods rules depend on the designated area, the transaction and statutory conditions.
- Check the current designated-zone status.
- Map goods movements and where they are consumed.
- Services require their own place-of-supply analysis.
Separate a free-zone licence from VAT status
A free-zone licence does not place every transaction outside UAE VAT. VAT Designated Zone treatment is a distinct concept with conditions applying to particular goods transactions. Establish the precise location and relevant status before examining a supply. Keep this analysis separate from the Corporate Tax qualifying-income regime: the two taxes have different tests. A company should not use a general free-zone marketing statement as evidence for its invoicing or VAT registration position.
Trace the movement and use of goods
For goods transactions, document where the goods start, where they are delivered and how they are used or consumed. Connect the contract, invoice, transport and customs evidence. Transactions entirely within an area, transfers between areas and goods moving to the mainland can raise different questions. The warehouse address alone is not a complete analysis. If the supporting records do not demonstrate the claimed movement, resolve that evidence gap before relying on a special treatment.
Analyse services on their own terms
Do not automatically apply a goods rule to services supplied by or to a free-zone business. Identify the actual service, supplier, customer and relevant place-of-supply rules. A company may make goods sales and provide installation, support or other services under the same commercial arrangement, requiring a careful review of what is supplied. Keep the reasoning with the contract so the treatment can be revisited when the business model or terms change.
Connect classification to registration and returns
Compile the business’s activities and supplies for its registration assessment rather than assuming Designated Zone status removes all obligations. Maintain a transaction matrix showing the treatment, relevant evidence and reporting approach for each supply stream. Review it when a new warehouse, customer route or product line is introduced. Use the current official FTA guide and clarification to confirm zone distinctions, and avoid copying an old count or list of zones as proof of present treatment. Use a supply-level review when goods and services are sold together, rather than assigning one code solely from the company’s location.
YOUR NEXT STEPS
A practical way forward
- 01
Step 1
Identify the legal entity and precise operating location.
- 02
Step 2
Trace goods, customers and delivery evidence.
- 03
Step 3
Document each supply’s treatment and registration impact.
CLEAR ANSWERS
Frequently asked questions
Are all free zones outside UAE VAT?
No.
Does Designated Zone treatment remove all registration obligations?
No. Review the particular activities and supplies.
Earlier article & background First published 13 November 2017 · retained for context
This earlier article is preserved for context. Its rates, deadlines, approvals and announcements may have been superseded. Use the current guidance and official references on this page for your next step.
Is VAT registration mandatory for Free Zone companies in Dubai, UAE?
The short answer is YES. In recent, DMCC, DWC Free zones advised their customers to register for VAT.
DWC :
“There are strict deadlines on the requirement to register for tax, which are dependent on the size of your business. We recommend that you read the guidelines set out in the following website and register in advance to ensure you avoid incurring any fines”
DMCC:
Dear Valued Member,
The VAT Executive Regulations have not been released into the public domain and complete clarity on the treatment of Free Zones is still awaited.
However, based on the available information, we understand that all entities having a taxable supply exceeding AED 375,000 would be required to register for VAT and those with taxable supply between AED 187,500 and AED 375,000 may opt to register for VAT.
Further, the Ministry of Finance has issued the following deadlines for registration:
- Before 31 October 2017 – Businesses with a turnover exceeding AED 150mshould apply for registration
- Before 30 November 2017 – Businesses with a turnover exceeding AED 10mshould apply for registration
- Before04 December 2017 – All other business entities should submit their application to minimize the risk of not being registered in time for VAT go-live
We will share further information as soon as it is announced by the FTA. Nevertheless, you will need to be registered in order to claim back any VAT you pay as a business.
Our advice is to start the registration as soon as possible
JAFZA
Federal Tax Authority advised to do the registration for companies registered under JAFZA as well.
Other Free Zones: Its advised to register
Saif Chartered Accountants provide Vat Registration Services, Complete VAT Consultancy Services all around the UAE – Dubai, Abu Dhabi, Ajman Ras- Al Khaimah, Fujairah & Umm-Al Quwain.
VERIFY THE DETAIL
Official sources & further reading
Source checks support this general guide. Your treatment depends on the facts, tax period and applicable legislation.
