Definition

A Designated Zone is a special area in the UAE treated as outside the country for VAT purposes. Supplies within, to, and from designated zones follow special VAT rules.

Key points

• Only certain free zones are classified as Designated Zones by Cabinet Decision.
• Movement of goods between designated zones is VAT-free.
• Services supplied are generally subject to VAT.
• Strict conditions apply: fenced area, security, and Customs controls.

Practical example

A company imports goods into JAFZA (a designated zone). No VAT is charged on the import, but VAT applies when goods enter mainland UAE.

Why it matters

Understanding designated zones is vital for correct VAT treatment of imports, exports, and free zone trade.