UAE VAT in Free Zones

Sat 9th Sep 2017

The UAE plans to introduce 5% on from 1 January 2018. This is part of the role out of a VAT and Customs Union plan with the other five Gulf Co-Operation Council states: Bahrain; Kuwait; Oman; Qatar; and Saudi Arabia.

Will United Arab Emirates Free Zones be VAT exempt?

The UAE published its VAT decree law on 27 August, but has yet to issue the detailed Executive Regulation. One issue to be resolved is the VAT position in Free Zones. The UAE has almost 40, highly-successful Free Zones at ports, airports and mainland. They have special tax, customs and import regimes.
The VAT law covers this area in Articles 50 to 52, but does not provide details of the liability position. It refers to Designated Zones being outside of the state and VAT exempt. However, it is not clear that Free Zones will be automatically considered as Designated Zones. It is likely that bonded warehouses will be considered as Designated Zones, with the right to move or exchange ownership of goods within the warehouses without VAT liabilities or reporting.

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