A designated zone in the UAE is a free zone listed by Cabinet decision and treated as outside the UAE for VAT on goods, if it meets four conditions. Airlift Logistics moves goods in and out of these zones daily. Dubai Airport Free Zone and Jebel Ali Free Zone are on the original list.
What makes a free zone a designated zone?
Being a free zone is not enough. Article 50 of the VAT Decree-Law says a designated zone is an area named by Cabinet decision, and Article 51 of the Executive Regulation sets the conditions. If only part of a zone meets them, only that part counts.
- A specific, fenced geographic area.
- Security measures and customs controls on people and goods entering and leaving.
- Internal procedures for keeping, storing and processing goods.
- An operator that follows the Federal Tax Authority's procedures.
Are DAFZA and JAFZA designated zones?
Yes, both are on the list in Cabinet Decision 59 of 2017, which took effect on 1 January 2018. The Dubai entries include Jebel Ali Free Zone (North-South), Dubai Airport Free Zone, Dubai Aviation City, Dubai Cars and Automotive Zone, Dubai Textile City and the free zone areas in Al Quoz and Al Qusais. The list was amended in 2018 and 2019, so check the FTA list for other zones.
How is VAT applied when goods move?
| Goods move | VAT treatment (FTA Designated Zones Guide) |
|---|---|
| Abroad into a designated zone | Treated as outside the UAE for VAT on goods |
| Mainland into a designated zone | Not an export; treated as a local supply |
| One designated zone to another | Outside the scope of VAT, if goods are unchanged and move under customs suspension |
| Designated zone to the mainland | An import: import VAT is due |
| Used or lost inside the zone | Treated as imported, so VAT can be due |
Does a company in a designated zone register for VAT?
Yes, if it passes the threshold. The FTA treats businesses in designated zones as resident in the UAE for VAT. Registration is mandatory above AED 375,000 of taxable supplies and voluntary above AED 187,500. The designated zone rule also covers goods only: services supplied in the zone are generally taxed as normal.
This is a logistics guide, not tax advice. Confirm your own position with a UAE tax adviser or the Federal Tax Authority.
For DAFZA moves, see our logistics for Dubai Airport Free Zone companies. For the Jebel Ali side, read our JAFZA guide.
Quick answers
What is the difference between a free zone and a designated zone?
A designated zone is a free zone with special VAT treatment for goods. Free zone is a licensing and customs term. Only free zones named by Cabinet decision, and meeting the four FTA conditions, are treated as outside the UAE for VAT on goods. Other free zones follow normal UAE VAT rules.
- Services are generally taxed as normal.
- Check the FTA list for your zone.
Is moving goods from a designated zone to the mainland taxable?
Yes, the FTA treats it as an import into the UAE. Import VAT at 5% is due, and customs duty applies when goods enter the mainland. If the same goods already bore VAT in the zone, a registered importer can usually recover the import VAT under a special rule, if records are kept.
- Keep the import declaration.
- Plan the duty into your selling price.
Sources: FTA Designated Zones VAT Guide, UAE VAT Decree-Law 8 of 2017, FTA VAT Executive Regulation. How we check our content.
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