UAE confirms Free Zones not VAT free
United Arab Emirates (UAE) Free Zones have been confirmed as not benefiting from automatic VAT-exempt status on the introduction of the new indirect tax from 1 January 2018.
There are over 40 Free Zones in the UAE – generally at ports, airports and major cities. They benefit from relaxed trading rules for foreign companies to encourage inward investment. The UAE VAT law covers this topic in Articles 50 to 52, but does not provide details of the VAT status for Free Zones.
Designated Zones as VAT free
Instead, the VAT Act refers to Designated Zones as being VAT free. In the UAE Executive Regulation on Excise Tax it now clarifies Designated Zones as being a specific zone with security measures controlled by a warehouse keeper. Free Trade Zones may still qualify as VAT-free Designated Zones – but it is not automatic.
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