Designated Zones are special areas in the UAE that are treated as being outside the territory of the UAE for VAT purposes.
Transfer of Goods
- Outside UAE to Designated Zone: Not subject to VAT (Outside Scope).
- Mainland to Designated Zone: Subject to VAT (Local movement).
- Between Designated Zones: Outside Scope of VAT if:
- Goods are not used/altered during transfer.
- Transfer is under customs suspension (GCC Customs Law).
Importing from Designated Zone to Mainland
Moving goods from a Designated Zone to the UAE mainland is treated as an Import. The importer must account for Import VAT.
Services in Designated Zones
Unlike goods, services supplied within a Designated Zone are subject to VAT at the standard rate (5%), as the zone is considered part of the UAE for services.
Real Estate
Sale or lease of real estate in a Designated Zone is treated as a supply of goods and is generally Outside Scope of VAT. However, hotel rights and other real estate services remain taxable.