FTA's new move relieved Tax registrants from double VAT Taxation on supplies in designated zones

In the UAE, VAT is applicable all over the country, except for designated free zones, a specific area assigned to be outside the UAE for Value Added Tax (VAT) purposes.

‍

What are Free zones in the UAE?

Free zones are geographic areas with security measures in place to watch the movement of goods and people. The transfer of goods between the designated zones is tax-free.

‍

The designated zones are not considered inside of the UAE for VAT purposes. Therefore, VAT generally does not apply in the designated zones.

There are around 23 designated free zones all across the UAE.

The VAT Guide on Designated Zones published by the Federal Tax Authority on 29 July 2018 explains a Free Zone’s specific characteristics and how it can be distinguished as a Designated Zone for VAT purposes.

‍

FTA’s new amendment

The FTA, on October 30th, 2022, announced an amendment to Article 51 of Cabinet Decision No. (52) of 2017.

According to the amendment, tax registrants are permitted to avoid VAT double taxation for the supply of goods in designated zones.

The clarifications to the amendment are available on the authority’s website by FTA. This will raise tax awareness among business sectors and ensure the best tax compliance.

As per the document,the supply of goods in the Designated Zone must be transacted outside the scope of UAE VAT, if the goods are not consumed inside the country, or in case the goods are consumed outside the Designated Zone.

The shipping and delivery services of Qualifying Goods are also outside the scope of UAE VAT if they are supplied by the same supplier of the goods, under certain conditions, including the supplier is a non-resident who is not registered for VAT in the UAE.

Read the full blog on Finanshels

Are you ready to handle a recession or are you still worried about your finances Book a Free Demo and see what Finanshels can do for you.