VAT For Designated Zone

 

VAT For Designated Zone

The federal Tax Authority of UAE is the central authority of taxes. The value added tax was introduced in the UAE on the first January 2018. The rate is 5%. Vat is the new source of income for the UAE.As a general consumption tax on the supply of goods and services. It applies to those supplies which take place within the territorial area of the UAE. The designated zone which is known a free zone as well’ is nominated for VAT purposes. The free zone has been excluded from the territorial scope of the UAE for VAT purposes. Only those zones have been listed in a cabinet decision qualify for special VAT treatment has certain limitations.

Designated Zones are as under

1.      Subject to strict control criteria.

2.      Required to have security procedures in place to control the movement of goods and people to and from the designated zone.

3.      Required to have customs procedures to control the movement of goods into and out of the designated zone.

4.      Trades outside the territory of the UAE for VAT purposes for certain supplies goods.

A designated zone is an area which is specified by the cabinet decision and that meets the conditions prescribed in the UAE Executive Regulation. The designated zone is considered to be outside the state of UAE for VAT purposes. There are some rules for transfer of goods into designated zone

Generals Rules of goods into designated Zone   

There are some rules apply to transfer of goods into designated zone

1.      When from outside the  UAE into designated zone out of scope of UAE VAT, as the supply is considered to be moving from outside the UAE to outside the UAE.

2.      When the is from the mainland of UAE to a designated zone, it is treated as a local supply and taxed as such, and not considered an export from the UAE.

3.      Transfer or supply of goods between designated zones, it will be treated as out of scope of UAE VAT, as long as the goods are not released into circulation, used, or altered in any way during the transfer between the designated zones, and the transfer is undertaken in accordance with the rules for customs suspension per the GCC common customs law.

 

Zero Rated Zones

VAT is charged at zero in respect of the following main categories of supplies.

1.      Export of goods and services to outside the GCC.

2.      International transportation and related supplies.

3.        Supplies of certain sea, air and land means of transportation such as aircraft and ships.

4.      Precious metals e.g. gold, silver and other of 99% purity.

5.      New constructed residential properties that are supplied for the first time within 3 years of their construction.

6.      Supply of certain education services, relevant goods and services.

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