Most UAE free-zone companies must register for VAT if they make supplies into mainland UAE or service supplies anywhere. Only goods supplies within or between designated zones (like JAFZA, DMCC) are out of scope. Service supplies are always taxable, regardless of free-zone status.
Three types of free zones for VAT
Most clients believe ‘free zone = no VAT’ — that’s wrong. Only specific FTA-listed designated zones get the goods-out-of-scope treatment, and even there services are always taxable.
| Zone type | VAT treatment | Examples |
|---|---|---|
| Designated free zones | Goods within DZ are out of scope; services are 5% | JAFZA, DMCC, KIZAD |
| Non-designated free zones | Treated like mainland; 5% on most supplies | IFZA, DIFC, ADGM, most RAKEZ |
| Mainland | Full 5% on all standard supplies | Sharjah Mediacity, Dubai South business |
Free-zone companies that MUST register
- Anyone supplying services — even within their own DZ, services are 5% standard
- Anyone supplying into mainland — 5% applies, regardless of free zone
- Anyone above AED 375K in 12 months of taxable supplies
- Anyone making zero-rated supplies who wants to recover input VAT
Free-zone companies that may skip registration
Very narrow set:
- Companies operating only inside a designated zone, supplying goods only, to other DZ companies, with no services at all
- Companies whose supplies are fully zero-rated exports and below AED 375K
- Companies in setup phase (no supplies yet)
Common scenarios
- JAFZA trader importing to JAFZA, exporting from JAFZA: goods supplies out of scope; services (logistics, handling) charged 5%
- DMCC consulting firm billing UAE clients: 5% on all invoices, register at threshold
- IFZA holding company with mainland subsidiaries: 5% on management/services billed to subs, register
- RAKEZ manufacturer exporting outside GCC: zero-rated; register voluntarily to recover input VAT
- ADGM fund management: most supplies zero-rated or exempt; mixed apportionment applies
Registration process for free-zone companies
Same EmaraTax flow as mainland, with an extra check:
- Submit trade licence — FTA reads zone status from your licence
- Declare designated-zone status if applicable (drop-down in form)
- If you only do intra-DZ goods, you can request ‘exception from registration’ — rare and approval-dependent
- Standard documentation otherwise
Free-zone-specific VAT setup
We register, configure your accounting tool for DZ vs non-DZ supplies, and brief your team. Fixed fee.
Frequently asked questions
Are free zone companies exempt from UAE VAT?+
No, in most cases free zone companies must register. Only specific ‘designated zones’ get goods-out-of-scope treatment, and only on goods supplies — services are always taxable.
Is DMCC a designated zone?+
Most of DMCC’s specific areas are designated, but not all. Check the FTA’s published list against your specific address.
What about IFZA?+
IFZA is not a designated zone for VAT purposes — treated as mainland. IFZA companies register at AED 375K threshold.
Do I charge VAT to other free-zone companies?+
For goods within or between designated zones — out of scope. For services — yes, 5%. For non-designated zones — yes, 5%.
Can I get a VAT exemption certificate?+
There’s no general ‘free zone exemption’. Specific exception from registration may be granted for narrow intra-DZ goods-only businesses, but it’s rare.
Where do I find the designated zones list?+
FTA publishes it on tax.gov.ae. We refresh quarterly — message us for the current list.