TaxSavvyAE

VAT for free zone businesses

Is my free zone company outside VAT?

The situation

Free zone companies follow normal VAT rules for services. Only certain designated zones get special treatment for goods moving inside or between them.

The law

  • Federal Decree-Law 8 of 2017, designated zone provisions: Special treatment for goods within designated zones
  • Art 13, Federal Decree-Law 8 of 2017: Mandatory registration threshold applies to free zone companies too

What it means for you

A consultancy in a free zone charges VAT like any mainland firm once registered, and exports of services can be zero-rated if conditions are met. A goods trader in a designated zone may treat some transfers of goods as outside scope, but sales into the mainland are taxable. Example: an IFZA software firm billing AED 500,000 to UAE clients must register and charge 5 percent. Do the threshold test monthly.

What to do

  1. Check whether your zone is a designated zone for goods.
  2. Run the AED 375,000 threshold test.
  3. Register on EmaraTax if required.
  4. Set VAT codes for local, export and zone supplies.

We can do this for youFree zone company setup: choosing between DMCC, JAFZA, IFZA, Meydan, RAKEZ, ADGM and others, licence, visas and tax status: AED 3,500

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