What would be UAE VAT effect on supply of goods by a company based in Designated Zones in UAE?

17/1/2018

Designated Zone is an area specified by a decision of the UAE Cabinet upon the recommendation of the Minister of Finance, as a Designated Zone for the purpose of the UAE VAT Law and rules made there under. Currently there are 20 designated zones in UAE.

Supply of goods and services to outside implementing states (currently UAE and KSA) would attract 0% Vat.
Supply of goods to other designated zones would be out of the scope. But may require deposit of equivalent of vat tax on the value of the goods subject to such transfer while the goods are in transit from one designated zone to another.
Supply of goods to other companies based in UAE would be subject to 5% standard rate of vat.
Supply of goods to other implementing states (now only KSA)
1. Registered customers (under KSA VAT) would pay vat on reverse charge basis there is no need from our side to charge vat. But company must keep the record of such transfer like shipping documents, delivery notes and the Tax Registration Number of such customers.
2. Un-Registered customers (under KSA VAT) would be treated as any other customers and company would have to charge vat tax at standard rate.

Gupta Accountants competent team as Vat Consultants in Dubai, provides supports at all the stages of the Value Added Tax on good and services in UAE to local companies, free zone based companies and designated zone based companies of Dubai, Abu Dhabi Sharjah, Umm Al Quwain, Ajman, Ras Al Khaimah and Fujairah.
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6 Comments

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Ramesh Kumar Gupta is a young and dynamic Chartered Accountant and has 19 years of experience in assurance, accounting, audit and business management. He is a member of the Institute of Chartered Accountants of India (ICAI). He is the Managing Partner of Gupta Accountants an accounting and advisory firm in Dubai UAE

Jojimon Chacko

31/3/2018 09:31:31 am

Please refer Article (48) Clause 3 of the Cabinet Decision No. 52 of 2017

3. Where a Taxable Person who has a Place of Residence in the State receives a supply of Goods or Services with a Place of Supply in the State, from a supplier who does not have a Place of Residence in the State and does not charge Tax on that supply, the supply shall be treated as being of Concerned Goods or Concerned Services subject to Clause (1) of Article (48) of the Decree-Law.

Your Point No. 3 mention that - Supply of goods to other companies based in UAE would be subject to 5% standard rate of vat. Would you please refer Article 48 Clause 3 and comment? As we understand VAT should be 0% for the supply of Goods from Designated Zones to UAE mainland and importer on record needs to account for VAT under reverse charge mechanism. If the Designated zone can charge 5% VAT, would you please substantiate it with relevant VAT law - VAT Decree Law and Cabinet Decisions.

Thanks for your support..

Jojimon Chacko

Ramesh Kumar Gupta link

29/4/2018 09:23:05 pm

Dear Jojimon Chacko,

Thanks for visiting blog page of Gupta Accountants, UAE VAT Advisors & Consultants in Dubai.

Thanks for your valuable comment.

Yes. A designated zone company must charge 5% VAT on goods sold for the consumption in designated zone.

Regards.

30/4/2018 01:30:27 pm

Dear Sir,

Thanks for your response. But the answer is not on my question. My question is on the Sale by a Designated Zone company to a UAE main land company. Can the seller charge VAT?

Thanks & Regards,

Jojimon Chacko

Ramesh Gupta link

17/8/2018 10:46:02 am

Dear Jojimon Chacko,

Thanks for visiting blog page of Gupta Accountants, UAE VAT Advisors & Consultants in Dubai.

Seller based in designated zone would not charge vat for the sales made to mainland companies. 5% vat would be paid on reverse charge basis by the buyer as the goods would be cleared from the designated zone under buyers TRN.

Regards

Anna

9/7/2018 08:44:12 am

Hi Good Morning! Could you please advise, if we are designated zone company supply goods to Mainland (UAE) with transportation/Freight charges (DDP Dubai), what would be the VAT treatment? Is 5% applicable to total amount both goods & freight cost?
What if supply of goods from designated zone to GCC with transportation charges, what is the VAT treatment?
Appreciate your kind help on this matter.
Thank you

17/8/2018 10:42:15 am

Dear Anna,

Thanks for visiting blog page of Gupta Accountants, UAE VAT Advisors & Consultants in Dubai.

We would request you to contact us on info@guptaaccountants as we would need additional details to reply on your query.

Regards

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What would be UAE VAT effect on supply of goods by a company based in Designated Zones in UAE?

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