Amendment on Tax Treatment for Supply of Goods in Designated Zones and Connected Shipping/Delivery Services Goes Into Effect on October 30
Abu Dhabi, October 30, 2021 – The Federal Tax Authority (FTA) has confirmed the importance of Cabinet Decision No. (88) of 2021 to amend Article 51 of Cabinet Decision No. (52) of 2017 on the Executive Regulation of Federal Decree-Law No. (8) of 2017 on Value Added Tax (VAT), indicating the decision coming into effect as of today (Saturday, October 30, 2021).
The amendment in the tax treatment for the supply of goods in Designated Zones and their connected shipping or delivery services aim to avoid VAT Double Taxation on supplied goods in the Designated Zones and facilitate procedures to non-resident suppliers operating in the Designated Zones, as these goods will be treated - under certain conditions – outside the scope of tax, hence, no tax registration is required from the supplier.
The Federal Tax Authority issued ‘Public Clarifications’ in relation to the Cabinet Decision to amend Article 51, explaining the new amendment in the tax treatment for the supply of goods in Designated Zones and their connected shipping or delivery services, available on the authority’s website in an effort to raise tax awareness among business sectors and ensure the best tax compliance rates. The service can be accessed using the following link: https://www.tax.gov.ae/en/vat/guides-listing
Designated Zones have been defined by a Cabinet Decision and must meet certain conditions for specific supplies. A full list of all 27 Designated Zones be accessed through the Authority’s website; the Zones are treated as being outside the territory of the UAE for VAT purposes.
According to the Authority’s “Public Clarification”, the supply of goods in the Designated Zone must be transacted outside the scope of UAE VAT, if said goods are not consumed inside the country, or in the case that the goods are consumed outside the Designated Zone, and provided that evidence is obtained and retained proving that the goods were delivered to a place outside the UAE or that VAT was paid on the import of these goods from the Designated Zone to the UAE. Shipping and delivery services of Qualifying Goods is also outside the scope of UAE VAT if they are supplied by the same supplier of the goods, under certain conditions, including the supplier being a non-resident who is not registered for VAT in the UAE.
The Public Clarification offered a detailed explanation and guidelines on implementing the Amendment of Article (51) of the Cabinet Decision regarding the Executive Regulations of the Federal Decree-Law on Value Added Tax.
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