The main thing that all the people need to know about the designated zone is that it is a zone that will be treated as an entity that is outside the state and implementing states. This would basically be for the purpose of VAT in UAE. This is the reason why this sort of a zone would be requiring a different VAT computation from the designated zone.
The rate of VAT might be different in different areas of UAE. for this you first need to know about the area you are working in. this is how you would be able to get an idea of how the things would work for you in your area and how much VAT you would have to pay according to your area.
Here are the following scenarios under which we will discuss the treatment of goods and services
Goods supplied from;
- Designated Zone to another Designated Zone
- Designated Zone to Mainland
- Designated Zone to outside the UAE State
Goods supplied from designated zone to another designated zone
The main thing in such a supply would be that it will not attract VAT from any side. This means that if any sort of goods is being supplied from one designated zone to the other, no VAT will be implemented on it.
Whenever the supply will be between the designated zones, no VAT will be charged on them. if the zone is out of the designated zone in which the goods are being supplied, the VAT will be applied but the conditions and computation criteria will be different.
Goods supplied from a designated zone to mainland
The scenario here will be a little different from that of the one we read before. Now in this case, when the supply will be carried out from a designated zone to the mainland, the goods will come under the category of imports. This means that such a supplier who is supplying goods from the designated zone to the mainland will have to pay VAT. The VAT here in this case will be charged on the reverse basis. It will be considered similar to the import of goods from other countries
The VAT in such a case will be charged at 5 per cent rate.
Goods supplied from designated zone to outside the UAE State
When the goods will be supplied from a designated zone to the mainland, it will be considered as impros whereas when the goods will be supplied from the designated zone to outside of the UAE, it will be considered as exports. This means that there will be zero-rated supplies.
If someone has supplied the goods from a designated zone to outside the UAE, no VAT will be charged in this case.
Supply of services
The above-mentioned scenarios were basically for the supply of goods. For the supply of services, the things are actually a little different for VAT in Dubai. Supply of services are not operated in the same way as the supply of goods is operated.