Many companies believe that they do not have to register for VAT as they are in the FreeZone. While some confusing rules exist which have led to this common misunderstanding in most situations, yes, Free Zone companies should also register!
Officially a company does not have to register until it reaches 375,000 AED in revenue. Many companies however, are unsure what their revenue will hit during the year, leading to further complication.
In addition some FreeZones have been called ‘Designated Zones’.
Gulf News reported that The Ministry said: “Although Designated Zones are part of the UAE territory, for VAT purposes, they are treated as being outside the UAE. ” Yet to summarise when reading further, goods consumed within the UAE, either within the Designated Zone or outside of it, are still eligible for VAT.
The reality is, therefore that for many FreeZones, within the designated zones, the goods are consumed within the UAE and therefore VAT should be charged. In addition if goods are supplied within the designated zones and consumed by a person in that zone then VAT is also chargeable.
So at a high level without going into all the detailed regulations, VAT is chargeable if goods are sold within the UAE. And it is is principally when the goods or services are not consumed or altered within the UAE that VAT is not chargeable.
As usual, with all government regulations it is down to interpretation, and so the above article is just provided as a general overview. Each company is unique with bespoke requirements and a unique tax situation. Therefore advice should be sought when applying the new VAT regulations to your company.
If you need assistance please get in touch with Advisors M.E.
Contact firstname.lastname@example.org, or call a member of the team on +971 525657334.
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