In the past few years, there has been a gradual but noticeable increase in the number of businesses which are being established in countries abroad. This has been possible due to the advancements in technology, increasing globalization and the shrinkage of the world as a result of better and seamless internet connectivity around the globe.
The United Arab Emirates is considered a very suitable location for setting up a business as it provides a suitable business environment that will allow the businesses to grow both in size and profits. Setting up a business in the UAE will also be a strategically good decision for a company as it will allow expanding the business into the Middle Eastern markets.
When it comes to business setup in the UAE, one of the most attractive parameters to international investors is the presence of Free Zones in the country. There are a number of benefits of these Free Zones which has been mentioned below:
- The businesses which are established in a Free Zone need not pay any taxes. This is a huge benefit to the business as taxes play a deciding role in the profits earned by a business.
- The Free Zones are located all over the UAE and in all the different emirates. This allows the business to choose its location of set up according to the requirement of the business.
- Many of these Free Zones are specific to a particular sector or industry which is very helpful for a start-up to gather the necessary knowledge.
- These Free Zones have their own administration and governing authorities and thus they make it their responsibility to help the business to achieve their goals.
According to the UAE VAT Law, free zone companies need to undergo VAT registration. If you are an investor or a business owner planning to invest or start your business in UAE free zones, you do need to go register for VAT and need to be aware of certain important aspects. Do read below…
What Is a Free Zone?
According to the rules set by the UAE VAT Law, a designated free zone is an area that meets the condition specified under the Executive Regulation of VAT Law, and so is treated as an outsider. According to the VAT implementation rule, the transfer of goods between these free zones will bear no tax making it a perfect location for setting up a business.
Let’s have a look at the designated free zones in UAE, as specified by the Cabinet.
List of Designated Free Zones in the UAE
1. Abu Dhabi
- Free Zone of Khalifa Port
- Abu Dhabi Airport Free Zone (ADAFZ)
- Khalifa Industrial Zone (KIZAD)
2. Dubai
- Jebel Ali Free Zone (JAFZA)
- Dubai Cars and Automotive Zone
- Dubai Textiles City
- Free Zone in Al Qusais
- Dubai Aviation City
- Dubai Airport Free Zone (DAFZA)
3. Sharjah
- Hamriyah Free Zone
- Sharjah International Free (SAIF) Zone
4. Ajman
- Ajman Free Zone
5. Umm al-Quwain
- Umm-Al-Quwain Free Trade Zone in Ahmed Bin Rashid Port
- Umm Al-Quwain Free Trade Zone in Sheikh Mohammed Bin Zayed Road
6. Ras al-Khaimah
- RAK Free Trade Zone
- RAK Maritime City Free Zone
- RAK Airport Free Zone
7. Fujairah
- Fujairah Free Zone
- Fujairah Oil Industry Zone (FOIZ)
Applicability of VAT in Designated Free Zones in the UAE
According to one of the sources, it has been noted that the Dubai Multi Commodities Centre (DMCC) has urged its companies, whose annual taxable supply turns out to be a minimum of AED 375,000, to get registered under the VAT Law. A similar move has also been taken by JAFZA as well. As per the Federal Cabinet Decision, failure to register for VAT would lead to a penalty payment.
Thus, you have an idea regarding VAT registration urgency in spite of being established in a free zone in the UAE. The sooner you opt for the same, the better. Now, implementing the VAT rate in an existing or a new business needs certain specifications that are to be fulfilled. Understanding the legal law turns out to be of utmost importance. At this point, the best option is to have a word with a tax consultant who can help you deal with the implementation of the VAT process.
If you are looking for assistance in such matters then JAXA is here to help you out and would assist you in matters of business so that the business faces no problems in the future. To know more about the various services in which Jaxa Chartered Accountants can assist you and to initiate the process, do contact us – we’d be happy to assist you.
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