Page 60 - Focus Group

• Attract foreign capital in security measures and and the transfer is undertaken in accordance
customs controls in place to monitor entry and with the rules for Customs suspension per the
exit of individuals and the movement of goods GCC Common Customs Law.
to and from the area.
• Transfer of goods from Designated Zone
Further, Free zones are identified explicitly by way to Mainland: A movement of goods from a
of Cabinet Decision as Designated Zone. Where Free Designated Zone to the mainland is considered
Zones are not a Designated Zone, it is treated like an import of goods into the UAE and hence
any other part of UAE. Custom duty and VAT are applicable on such
import.
A designated Zones are areas considered by the
UAE cabinet outside the scope of UAE VAT for certain
limited cases. All transactions are not considered
as VAT free (Outside the scope of VAT); Accordingly,
business in Designated Zone may be required to
register, account for VAT, file VAT returns and pay
VAT as per law & regulation.

VAT Provisions for Designated Zone Transactions

VAT law & regulation provisions applicable to the
business are complex in nature. Let us see some of
the general rules
• Supply of services: Place of supply for service
transactions are treated same as mainland
transaction.

• Goods supplied within a Designated Zone:
A supply of goods made within a Designated
Zone (i.e. where both the supplier and customer
are in the Designated Zone) will generally be
outside the scope of VAT provided the goods are
not consumed within the Designated Zone.

• Import from Outside UAE: Goods that arrive
into a designated free zone from outside the
UAE are generally not treated as imported into
the UAE. Therefore, no customs duty as well as
VAT is charged on such arrival of the good.

• Transfer of goods from UAE mainland to
Designated Zone: Supply or transfer of goods
into a Designated Zone from a place in the
UAE which is not a Designated Zone is not an
export for UAE mainland for VAT purposes and
therefore will not give rise to zero-rated VAT
treatment.

• Transfer of goods between Designated
Zones: It is treated as out of the scope of UAE
VAT, as long as the goods are not released into
circulation, used, or altered in any way during
the transfer between the Designated Zones, CA Sameer Kashikar

Disclaimer:
This article and/or write ups and/or any of its content shall not be treated as opinion and/or advice in any circumstances of the author(s) and/ or the Chapter. Reader’s to apply their best
judgement in the best interest of their requirement and should seek a formal opinion on any issue.

60 TAX JOURNAL 2020 The Institute of Chartered Accountants of India (Dubai) Chapter NPIO