Unlock Business Potential in UAE Designated Free Zones with JetUp
Are you exploring business opportunities in the UAE’s Designated Free Zones? Understanding the VAT framework in these special zones is essential for compliance and strategic planning. This guide provides a clear overview of the VAT treatment and the benefits of setting up your company in a Designated Zone — ensuring you are well-prepared to make informed decisions.
What Are Designated Zones?
Designated Zones in the UAE are specific free zones recognized under For the purposes of the Federal Decree-Law No. 8 of 2017 on Value Added Tax based on Cabinet Decision No. 59 as being outside the UAE for VAT purposes. These zones are designed to offer tax advantages and operational flexibility to businesses. To be classified as a Designated Zone, the following criteria must be met:
Gated and Monitored: The zone must be enclosed and subject to security and customs oversight for the movement of goods and individuals.
Internal Controls: Clear procedures must exist for storing, maintaining, and processing goods within the zone.
FTA Compliance: The zone operator must adhere to all relevant regulations issued by the Federal Tax Authority (FTA).
VAT Treatment in Designated Zones
Since the introduction of VAT in the UAE on January 1, 2018, businesses must navigate nuanced tax rules. Designated Zones are subject to special provisions:
VAT-Free Transfers: Movement of goods between Designated Zones or within the same zone is VAT-exempt — if strict conditions are met.
Imports/Exports: Goods exported from a Designated Zone or imported into it can be zero-rated, provided proper documentation and controls are in place.
Mainland Transfers: Transferring goods from the mainland or a non-designated free zone into a Designated Zone is subject to 5% VAT.
Outbound to Mainland: Goods moved from a Designated Zone to the mainland are treated as imports and taxed under the reverse charge mechanism.
Services: VAT at the standard 5% applies to services, regardless of location, as these are harder to monitor and control.
VAT Registration for Businesses in Designated Zones
Companies operating in a Designated Zone must assess their VAT registration obligations based on the following thresholds:
Mandatory Registration: If taxable supplies exceed AED 375,000 in the past 12 months or are expected to do so in the coming 30 days.
Voluntary Registration: If taxable supplies or expenses exceed AED 187,500 in the past 12 months.
Any individual or legal entity conducting taxable business activities in the UAE must register accordingly.
Full List of UAE Designated Free Zones
As per Cabinet Decision No. 59, the following zones are officially recognized as Designated Zones:
Abu Dhabi
Free Trade Zone of Khalifa Port
Abu Dhabi Airport Free Zone
Khalifa Industrial Zone
Al Ain International Airport Free Zone
Al Butain International Airport Free Zone
Dubai
Jebel Ali Free Zone (North and 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
UAQ Free Trade Zone (Ahmed Bin Rashid Port)
UAQ Free Trade Zone (Sheikh Mohamed 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)
Why Choose a Designated Free Zone?
Setting up in a Designated Free Zone provides significant advantages:
Tax Efficiency: Enjoy VAT exemptions and potential customs duty relief
Streamlined Logistics: Simplified import/export procedures
World-Class Infrastructure: Modern facilities ideal for logistics, manufacturing, and trade
Strategic Location: Positioned for global business access across Asia, Europe, and Africa
Get Expert Support with JetUp
Ready to establish your company in a UAE Designated Free Zone? JetUp specializes in company formation and relocation support, particularly for European entrepreneurs and investors.
Our experienced consultants provide comprehensive guidance — from business setup and VAT compliance to securing licenses and regulatory approvals. We ensure a seamless journey from concept to operational success.
Contact JetUp today to launch your venture in one of the UAE’s most business-friendly environments.
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