Free Zones Vat Treatment

• There is a list of designated freezones. Only supplies of goods made between these designated freezones will be outside scope of UAE Vat.
• Supplies of services (except shipping and delivery services in designated zones subject to certain conditions) whether they are in normal freezone or designated freezones are subject to normal UAE vat laws means they will be taxable
• The goods supplied between designated freezones, if used as end user or consumed, then these goods will be subject to normal UAE vat laws means they will be taxable.
• If the goods that are supplied between designated freezones, are used in the assembly or production of other goods in the same designated freezone, and those goods will be sold (should not be consumed )after production, then these supplies of goods will be subject to outside scope of UAE Vat.
• If the goods are transferred from outside UAE to designated zone, it will be outside scope of UAE Vat.
• If the goods are transferred from designated zone to UAE mainland, it will be import for UAE mainland recipient (even for tax group)
• Water and Energy (like Dewa) supplied in designated zone will be treated as taxable supply even it is used for production
• Oil, Gas supplied in designated zone, general rules will apply for designated zones supplies
• Real Estate: If property is sold or leased out in designated zone , it will not treat as consumption. It will be treated as outside scope of UAE Vat. If raw material purchased from designated zone for construction of property in designated zone, it will be outside scope of UAE Vat. If property is not supplied by way of sale or lease, it will be treated as taxable supply.
• Tax group can be formed between designated zone companies and UAE mainland company (referred as onshore company) if these companies satisfies normal criteria for control.