The government of UAE has always tried to provide some additional advantage to companies present in free zones as compared to the businesses in UAE mainland. Through these additional benefits, UAE is trying to compensate for limitations of these free zones and attract more and more companies towards them. It is helpful in creating balance between these two commercial areas.
One such additional advantage for free zones is their exemption from value added tax (VAT). Previously, 20 free zones were exempted from VAT and the latest decision by UAE has increased the number of free zones exempted from VAT to 23 out of total 45 in UAE. It means more than half of total free zones in UAE are now exempted from VAT.
According to details, UAE’s FTA (Federal Tax Authority) has added three more zones in the list of those designated areas that will be provided relief from VAT that was imposed in January 2018. FTA has revealed the names of these designated free zones. These are Al Ain International Airport Free Zone (Abu Dhabi), International Humanitarian City (Jebel Ali, Dubai) and Al Bateen Executive Airport Free Zone (Abu Dhabi).
All companies in these designated areas can avail these VAT-exemption benefits to goods that are not used in UAE. Apart from that, businesses supplying goods to these designated free zones will also be relieved from VAT. All these three areas can take advantage of their new status from 18th June 2018.
Out of total 23 designated free zones, 8 are located in Dubai, 5 in Abu Dhabi, 3 in Ras AL Khaimah, 2 each in Sharjah, Fujairah and Umm Al Quwain and 1 in Ajman. Currently, 45 free zones are operating in UAE (around 30 are present in Dubai alone) hosting thousands of companies. Apart from these already operational ones, work is underway for construction of 10 new free zones also. These will be part of UAE in coming months and years.
There is a possibility that more free zones will be included in this list of areas exempted from VAT in future. According to FTA, there is a specific criteria set for inclusion of free zones in this designated list and other free zones can also be part of this list by fulfilling this criteria. Conditions required to fulfill this criteria include controlled movement of goods (coming in and going out from the specific area), custom control and fenced boundaries. FTA further clarifies that labor accommodation is treated as residential property and will not be charged for VAT.
This is really good news for companies already operating in these newly designated free zones and urges others also to take advantage of this new status. It also provides chances for other free zones to be part of this designated list by fulfilling conditions laid for its criteria. You can easily be part of any of these special areas by contacting Riz & Mona Consultancy. We have already registered lots of companies in all free zones in Dubai and other emirates of UAE.