Change in the lists of Designated Zones

May 23, 2022Dated:  | |

Value-Added Services applies to all business houses supplying goods and services in the United Arab Emirates (UAE). The cabinet has specified some free zones to be designated zones (DZ), and they are exempt from UAE-VAT but with specific regulations. They receive special consideration because they are beyond the UAE territory under the purview of the UAE-VAT law.

The Federal Tax Authority (FTA) concentrates on applying the DZ rules more specifically when scrutinizing returns repayment and audits. Ignorance of the DZ rules is costing much money to many businesses in the form of penalties because of their incorrect VAT rule application. 

In some cases, the company itself is at fault with the DZ rule application on their taxable supplies. In other instances, the penalty results from the erroneous application of the same by their vendors.

This post lists the changes in the Designated Zones list.

How to Recognize a Designated Zone?

As per the cabinet decision concerning Federal laws relating to VAT in the UAE, a free zone will qualify to be a DZ, an area outside UAE territory only on the fulfillment of certain conditions. Below are the indications to identify a DZ:

  • A fence should protect the DZ.
  • The DZ must be secure and have customized controlling units to check goods inflow and outflow and the movement of people in the area. 
  • All commodities must be stored, retrieved, and processed within the DZ.

The persons who operate in the DZ must comply with the FTA’s rules and regulations. FTA’s DZ qualification standards are stringent; hence the business house in such zones must be meticulous in keeping records.

It is good to note that although the zone qualifies to be a DZ by the cabinet decision, it should fulfill the criteria mentioned above for the FTA to recognize it as a territory outside UAE.

Designated Zones under Cabinet Decision No. 59

Cabinet decision no. 59 marks the following free zones in UAE as DZ:

Abu Dhabi

  • Free Trade Zone of Khalifa Port
  • Abu Dhabi Airport Free Zone
  • Khalifa Industrial Zone
  • Al-Ain International Airport Free Zone 
  • Al Bateen International Airport Free Zone 

Dubai 

  • Jebel Ali Free Zone (North-South)
  • Dubai Cars and Automotive Zone (DUCAMZ)
  • Dubai Textile City
  • Free Zone Area in Al Quoz
  • Free Zone Area in Al Qusais
  • Dubai Aviation City
  • Dubai Airport Free Zone
  • International Humanitarian City – Jebel Ali

Sharjah

  • Hamriyah Free Zone
  • Sharjah Airport International Free Zone

Ajman

  • Ajman Free Zone

Umm Al Quwain

  • Umm Al Quwain Free Trade Zone in Ahmed Bin Rashid Port
  • Umm Al Quwain Free Trade Zone on Sheikh Mohammed Bin Zayed Road

Ras Al Khaimah

  • RAK Free Trade Zone
  • RAK Maritime City Free Zone
  • RAK Airport Free Zone

Fujairah

  • Fujairah Free Zone
  • Fujairah Oil Industry Zone (FOIZ)

Change in the lists of Designated Zones

FTA’s change in the list of DZ became effective on 18 June 2018. The new addition to the list are:

  • Al-Ain International Airport Free Zone
  • Al Bateen International Airport Free Zone 
  • International Humanitarian City – Jebel Ali

Conclusion

The above-discussed changes apply to all business houses trading and supplying from within a DZ for UAE-VAT compliance. The reforms also affect enterprises that acquire and receive items from suppliers in areas other than the UAE. 

Businesses that involve themselves in trading within or between DZs or move supplies to and from DZ should be more alert concerning the DZ rules while the supplies move in or out of the UAE border.

Flyingcolour can help you identify designated zones and comply with FTA’s requirement of proper monitoring and conscientious record maintenance.

Book your free consultation with us to know more about the comprehensive services. 

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