The current list of designated zones, compliance requirements, and common pitfalls for zone businesses.
Designated Zones List
The Cabinet designates specific free zones as designated zones. The list is provided in the Executive Regulations and has been updated through various amendments. As of the latest amendments, designated zones include areas within:
Jebel Ali Free Zone (Dubai)
Khalifa Industrial Zone (Abu Dhabi)
Hamriyah Free Zone (Sharjah)
Sharjah Airport International Free Zone
Dubai Airport Free Zone
Dubai Multi Commodities Centre (DMCC)
Ras Al Khaimah Free Zone
Fujairah Free Zone
Ajman Free Zone
Umm Al Quwain Free Zone
Note: The specific geographic boundaries and status of each designated zone should be verified against the current Executive Regulations, as amendments may add or modify zones.
Compliance Requirements for Zone Businesses
Determine zone status: Verify that your free zone is a designated zone under the current Executive Regulations.
Segregate goods and services: Apply different VAT treatments for goods (zone rules) and services (normal rules).
Maintain customs documentation: Track goods movement in and out of the zone.
Register for VAT: Designated zone businesses making taxable supplies (including services) must register if they exceed the thresholds.
File VAT returns: Report goods transactions (outside scope, zero-rated, or import) and services transactions separately.
Common Pitfalls
Assuming all free zone transactions are VAT-free: Only goods within/between designated zones are outside scope.
Not charging VAT on services: Services to UAE recipients are standard-rated.
Missing import VAT: Goods moving from zone to mainland are imports.
Poor documentation: Failing to maintain customs records for goods movement.
Not registering: Many free zone businesses must register for VAT if they make taxable supplies above the threshold.
Practical UAE example
**DMCC Company**: A company registered in Dubai Multi Commodities Centre (a designated zone) trades in physical commodities (gold, diamonds) and provides consulting services. For goods transactions within DMCC or with other designated zones, no VAT applies. For goods sold to mainland businesses, import VAT applies. For consulting services to mainland clients, 5% VAT is charged. The company must carefully segregate these transactions on its VAT return and maintain customs documentation for all goods movements.
Key takeaways
Designated zones are listed in the Executive Regulations and may be updated.
Zone businesses must segregate goods (zone rules) and services (normal rules).
Customs documentation is essential for goods movement tracking.
Many free zone businesses must register for VAT if making taxable supplies above thresholds.
Authoritative sources
Federal Decree-Law No. 8 of 2017 on Value Added Tax
United Arab Emirates — Federal Tax Authority · The VAT Law — Articles 1 to 82 (as amended by Federal Decree-Law No. 18 of 2022)
Effective: 1 Jan 2018Verified: 5 Oct 2026View source
Cabinet Decision No. 52 of 2017 on the Executive Regulations of the Federal Decree-Law No. 8 of 2017 on VAT
United Arab Emirates — Cabinet / Federal Tax Authority · Executive Regulations (as amended by Cabinet Decisions No. 46/2020, 24/2021, 88/2021, 99/2022, 100/2024, and 100/2025)
Effective: 1 Jan 2018Verified: 5 Oct 2026View source
FTA — VAT Guides, References & Public Clarifications
UAE Federal Tax Authority · Taxable person guides, tax invoice guides, input tax guides, designated zones, real estate
Effective: 1 Jan 2018Verified: 5 Oct 2026View source
Knowledge check
1. Which of the following is a common compliance pitfall for designated zone businesses?
This lesson is general educational content, not individualized tax or legal advice. Always consult a qualified professional for your specific situation.