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UAE confirms Free Zones not VAT free

  • Oct 18, 2017 | Richard Asquith

UAE confirms Free Zones not VAT free

United Arab Emirates (UAE) Free Zones have been confirmed as not benefiting from automatic VAT-exempt status on the introduction of the new indirect tax from 1 January 2018.

There are over 40 Free Zones in the UAE – generally at ports, airports and major cities. They benefit from relaxed trading rules for foreign companies to encourage inward investment.  The UAE VAT law covers this topic in Articles 50 to 52, but does not provide details of the VAT status for Free Zones.

Designated Zones as VAT free

Instead, the VAT Act refers to Designated Zones as being VAT free. In the UAE Executive Regulation on Excise Tax it now clarifies Designated Zones as being a specific zone with security measures controlled by a warehouse keeper.  Free Trade Zones may still qualify as VAT-free Designated Zones – but it is not automatic.

VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which won International Tax Review's 2020 Tax Technology Firm of the Year. Richard trained as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.