- VAT in the UAE applies across mainland and free zones but treatment varies depending on whether a free zone is a Designated Free Zone (DFZ) and whether supplies are goods or services. Differences affect zero-rating, place of supply, movement of goods, customs treatment, and VAT documentation requirements.
- Key angles to explore:
- Registration and threshold: Which entities must register and when.
- Designated Free Zones vs other free zones: How DFZs can be treated for goods movement and when VAT may not apply.
- Supplies of goods: When exports are zero-rated, when VAT is due on goods moved to the mainland, and documentation required to support zero-rating.
- Supplies of services: Why services are usually taxable even if supplied by a DFZ entity and when zero-rating for exported services may apply.
- Cross-border and intra-UAE transactions: Practical steps for charging VAT on B2B vs B2C, handling customs, and accounting for reverse charge.
- Input VAT recovery and blocked items: How mainland and free zone businesses reclaim VAT and common pitfalls.
- Record-keeping and audits: Best practices to reduce the risk of disputes with the FTA and customs authorities.
- Practical prompts for answers:
- Real-life examples of a DFZ-to-mainland goods movement and required paperwork.
- Sample checklist for VAT compliance when a free zone company sells to a mainland client.
- Common mistakes small businesses make when claiming zero-rating or recovering input VAT.
- Recommended internal controls and documentation retention periods.
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