According to the UAE VAT Law, the supply of the goods in the UAE mainland is under the preview of VAT provisions, and those goods supplied inside a designated zone are outside the scope of the UAE VAT unless consumed in the designated zone. But practically there are many confusions on the VAT treatments of the supplies between a mainland company and designated zone company. We are trying to explain the concept of the designated zone based on the provisions of the VAT Law and to explain the tax treatment on various practical scenarios to bring better understanding, Before explaining the VAT treatment for transactions with designated zones, we will explain to you about designated zones and conditions to identify them. It is important that only designated zones that satisfy the conditions as per the UAE VAT Law can be treated with the special rules and in other cases VAT should be applied as in UAE mainland.
Source: emiratesca.com
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