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UAE VAT in Free Zones

  • VAT
  • 09 September 2017 | Jason Moore

UAE VAT in Free Zones

The UAE plans to introduce 5% on from 1 January 2018. This is part of the role out of a VAT and Customs Union plan with the other five Gulf Co-Operation Council states: Bahrain; Kuwait; Oman; Qatar; and Saudi Arabia.

Will United Arab Emirates Free Zones be VAT exempt?

The UAE published its VAT decree law on 27 August, but has yet to issue the detailed Executive Regulation. One issue to be resolved is the VAT position in Free Zones. The UAE has almost 40, highly-successful Free Zones at ports, airports and mainland. They have special tax, customs and import regimes.
The VAT law covers this area in Articles 50 to 52, but does not provide details of the liability position. It refers to Designated Zones being outside of the state and VAT exempt. However, it is not clear that Free Zones will be automatically considered as Designated Zones. It is likely that bonded warehouses will be considered as Designated Zones, with the right to move or exchange ownership of goods within the warehouses without VAT liabilities or reporting.

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Avalara Author
Jason Moore
Avalara Author Jason Moore
Avalara helps businesses of all sizes get tax compliance right. In partnership with leading ERP, accounting, ecommerce, and other financial management system providers, Avalara delivers cloud-based compliance solutions for various transaction taxes, including sales and use, VAT, excise, communications, and other indirect tax types. Headquartered in Seattle, Avalara has offices across the U.S. and around the world in the U.K., Belgium, Brazil, and India.