Free Zone VAT
VAT treatment for free zone companies depends on whether the free zone is a ‘designated zone’ and on the nature and destination of supplies. Many free zone businesses still need to register and file VAT.
Dubai-based, FTA-aware VAT support for UAE businesses.
Being in a UAE free zone does not automatically exempt a business from VAT. The FTA recognises certain ‘designated zones’ that are treated as outside the UAE for VAT on specific goods transactions, but services and many supplies are still subject to the standard 5% VAT. Free zone companies that exceed the registration threshold must register and file VAT returns like mainland businesses; the treatment of each transaction depends on the zone type, the supply, and where the customer is located.
The FTA maintains a list of ‘designated zones’ — specific fenced free zones that, under defined conditions, are treated as outside the UAE for VAT purposes on certain goods. Crucially, this special treatment generally applies to goods, not services: services supplied within or from a designated zone are usually subject to the standard 5% VAT. Free zones that are not on the designated list are treated like the rest of the UAE for VAT. Confirming your zone’s status is the starting point.
Whether VAT applies to a free zone transaction depends on what is supplied, between whom, and where it ends up. Goods moved between designated zones may be outside VAT scope under conditions, while goods entering the mainland are typically taxed. Supplies to UAE customers, and most services, generally carry 5% VAT. Because the rules are detailed and condition-based, free zone companies benefit from a transaction-by-transaction review rather than assuming a blanket exemption.
Free zone businesses that exceed the AED 375,000 mandatory threshold must register for VAT and file returns, just like mainland companies. The added complexity is classification: getting the VAT treatment right for each type of supply. Exiloz helps free zone companies confirm their zone status, classify transactions correctly, register where required, and file accurate returns — so the free zone advantage is preserved without missing genuine VAT obligations.
No. Being in a free zone does not automatically exempt a business from VAT. Certain ‘designated zones’ receive special treatment for some goods, but services and many supplies remain subject to 5% VAT, and registration thresholds still apply.
A designated zone is a specific fenced UAE free zone listed by the FTA that, under defined conditions, is treated as outside the UAE for VAT on certain goods transactions. The treatment generally applies to goods rather than services.
Yes, if their taxable supplies and imports exceed the AED 375,000 mandatory threshold (or AED 187,500 for voluntary registration). The threshold rules are the same as for mainland businesses.
Generally yes. Services supplied within or from a free zone, including designated zones, are usually subject to the standard 5% VAT unless a specific rule applies.
Goods moving from a designated zone into the UAE mainland are typically treated as imports and subject to VAT. Movements between designated zones may be outside scope under conditions.
Yes. Exiloz helps free zone companies confirm their zone status, classify transactions, register where required, and file accurate VAT returns.
Exiloz helps free zone businesses get VAT classification, registration and filing right — so you keep your advantages without missing real VAT obligations.
