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.
The special VAT treatment of designated zones applies mainly to goods, not services. Goods moving within or between designated zones can, under conditions, be treated as outside the scope of UAE VAT; but services supplied in a designated zone are generally treated as supplied in the UAE and taxed at the standard rate. Assuming a designated-zone address makes everything VAT-free is one of the most common free-zone errors.
A free-zone company selling into the UAE mainland is generally making a taxable supply, and goods leaving a designated zone into the mainland typically trigger import VAT. The free-zone location does not remove the VAT; it changes where and how it is accounted for. Mapping which of your supplies stay within the zone framework and which cross into the mainland is essential to charging and recovering VAT correctly.
Free-zone status does not exempt a company from VAT registration. If your taxable supplies cross the threshold, you register like any other business, file returns and keep records — the designated-zone rules affect the treatment of particular supplies, not the obligation to be in the system. Free-zone companies that assume they are outside VAT altogether are among those most exposed to late-registration penalties.
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.
No — free-zone companies register and file like any business if they cross the threshold. Designated-zone rules affect the VAT treatment of certain goods, not the obligation to be VAT-registered.
A specific type of free zone, listed by the Cabinet, where qualifying movements of goods can be treated as outside the scope of UAE VAT under conditions. Not all free zones are designated zones.
Generally yes — services supplied in a designated zone are usually treated as supplied in the UAE and taxed at the standard rate, unlike qualifying goods.
Generally yes — a supply into the mainland is typically taxable, and goods leaving a designated zone into the mainland can trigger import VAT.
Licence, visas, bank account, books and the first tax return — handled by the same team, so the structure has to survive its first year.
PRO & Document Clearing
Establishment card, immigration file, visas, medicals and attestation.
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VAT Registration
Threshold checks, grouping and registration handled against the FTA's current rules.
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VAT Return Filing
VAT201 prepared, reconciled and filed, with the position documented.
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Corporate Tax Registration
Every taxable person must register, including free zone companies applying 0%.
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Corporate Tax Filing
Returns, elections and the qualifying income analysis behind them.
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Accounting & Bookkeeping
Books kept audit-ready from month one, not reconstructed at year end.
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Audit Preparation
Schedules, reconciliations and the evidence your auditor will ask for.
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Payroll & WPS
Payroll, WPS files and end-of-service calculated correctly.
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Exiloz helps free zone businesses get VAT classification, registration and filing right — so you keep your advantages without missing real VAT obligations.
