New Law Amendment Removes Double VAT Taxation on Goods Supply

The Federal Tax Authority (FTA) announced an amendment to Article 51 of Cabinet Decision No. (52) of 2017 on the Executive Regulation of Federal Decree-Law No. (8) of 2017 on value-added tax (VAT). According to this amendment, the double VAT taxation on supply of goods in designated zones will be rendered void.

This move not only avoids double VAT taxation on supplied goods in the predetermined areas but also introduces easy procedures for foreign suppliers carrying out business in the designated areas. This is because, by some conditions set, the goods in these zones will be outside the scope of tax. Hence, if you carry out a Dubai business setup in one of these zones, you won’t even have to register for tax.

The governing body responsible for this amendment, the FTA, has offered an explanation to this amendment. According to them, this amendment aims at slackening the taxation norms in certain areas of the country, and essentially, raising an awareness in the business world about effective tax compliance rates.

Find the complete clarification of the FTA here.

Designated Zones

The FTA has demarcated 27 designated zones within the UAE wherein this amendment will take effect. The 27 designated areas are as follows:

Dubai Aviation City
Umm Al Quwain Free Trade Zone
Free Zone Area in Al Quoz
RAK Airport Free Zone
Sharjah Airport International Free Zone
Umm Al Quwain Free Trade Zone
RAK Maritime City Freezone
Ajman Freezone
Jebel Ali Freezone (North-South)
Khalifa Industrial Zone
Fujairah Oil Industry Zone
Free Trade Zone of Khalifa Port
RAK Free Trade Zone
Dubai Cars and Automotive Zone
Freezone Area in Al Qusais
Dubai Airport Freezone
Hamriyah Freezone
Dubai Textile City
Abu Dhabi Airport Freezone

For VAT purposes, these 27 zones are considered outside of the UAE.

According to the “public clarification” the FTA issued on its official website, the supply and goods in question within the designated zone must be transacted outside the purview of the UAE VAT if they are not to be used within the country, or if the goods are consumed outside the designated zone. In order for this amendment to be applicable, one must be able to provide evidence proving that the goods are delivered outside the UAE territory or that the VAT was paid for importing the goods from the designated areas into the UAE. Delivery and shipping services of goods that fulfil the criteria are also exempted from the UAE VAT if supplied by the same supplier. In some circumstances, the amendment also applies to foreign suppliers who aren’t registered for VAT in UAE and want to carry out new business setup in Dubai.

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