Impact of VAT on Free Zone Companies
Under Article (51) of Executive Regulations of Value Added TAX Define the Designated Zones as follows:
Any designated zone specified by a decision of the Cabinet shall be treated as being outside the state and outside the implementing states, subject to the following conditions:
- The designated zone is a specific fenced geographic area and has security measures and customs controls in place of monitor entry and exit of individuals and movement of goods to and from the area.
- The designated zone shall have the internal procedures regarding the method of keeping, storing and processing goods therein.
- The operator of the designated zone complies with the procedures set by the Authority.
Treatment of VAT on the Inward Supply (Purchase) of Free Zone Company
| Nature of Supply | Nature of Transaction | VAT Application |
|
Supply of Goods
|
1. Free Zone TO Free Zone
2. Main Land to Free Zone
3. Outside UAE to Free Zone
|
Outside the purview of VAT Law (0%)
VAT @ 5%
Outside the purview of VAT Law (0%)
|
|
Supply of Services
|
4. Free Zone TO Free Zone
5. Main Land to Free Zone
6. Outside UAE to Free Zone
|
VAT @ 5%
VAT @ 5%
VAT @ 5% (on Reverse Charge Mechanism)
|
Treatment of VAT on the Outward Supply (Sales) of Free Zone Company
| Nature of Supply | Nature of Transaction | VAT Application |
|
Supply of Goods
|
1. Free Zone TO Free Zone
2. Free Zone to Main Land
3. Free Zone To Outside UAE
|
Outside the purview of VAT Law (0%)
VAT @ 5% (RCM)
Outside the purview of VAT Law (0%)
|
|
Supply of Services
|
4. Free Zone TO Free Zone
5. Free Zone to Main Land
6. Free Zone to Outside UAE
|
VAT @ 5%
VAT @ 5%
Outside the purview of VAT Law (0%)
|
