The Federal Tax Authority (FTA) has recently issued a public clarification in relation to Goods Supplied in a Designated Zone and Connected Shipping or Delivery Services. Furthermore, there are also some changes in Tax Procedure relating to filing reconsideration application and objection, which are effective from 1 November 2021. 

Clarification on Goods Supplied in a Designated Zone and Connected Shipping or Delivery Services

The FTA has amended Article 51 of the UAE VAT Executive Regulations pertaining to Designated Zones by issuing Decision No. 88 of 2021, i.e., to avoid double taxation on the following:

  1. goods supplied from a designated zone; and
  2. to provide registration relief to non-resident suppliers who also ship or deliver these goods.

The said Public Clarification1 provides guidance on the application of Article 51(5) and Article 51(7) of the Executive Regulation. The same has been explained below:

I. Amendment in Article 51(5)

Article 51(5) has been amended to provide for instances in which the supply of goods within a Designated Zone shall be considered as outside the scope of UAE by treating the place of supply outside the UAE:

  • The goods were intended to be incorporated into or used in the production of other goods in the Designated Zone and that such other good is not consumed;
  • The goods were delivered to a place outside the UAE. Furthermore, the supplier retains customs evidence and supporting commercial or official evidence proving the movement and delivery of the goods to a place outside the UAE;
  • In case the goods are imported from the designated zone to the mainland, the supplier retains relevant Customs documents proving import of goods and payment of VAT on the same.

II. Article 51(7)

Under the general rule as provided in Article 51(6) of Executive Regulation, the place of supply of any service supplied in a designated zone is considered to be in the UAE. Article 51(7) has been added to provide an exception to the general rule for shipping or delivery services supplied directly in connection with qualifying goods by treating such supplies as outside the scope of UAE VAT on fulfillment of certain specified conditions.

Change in Procedure

Furthermore, the UAE Cabinet has issued Federal Decree-Law No. 28 of 2021 (16 September 2021), amending Federal Decree-Law on Tax Procedures No. 7 of 2017 (11 June 2017) (The Federal Decree-Law on Tax Procedures)2, wherein the changes mentioned are effective from 1 November 2021. The changes pertain to an increase in the time limits for filing tax applications/objections and revising the criteria to filing objections before TDRC and appeal before the Competent Courts should significantly ease the tax disputes procedures for the UAE taxpayers.


1.  VATP027 - Goods and services supplied in a DZ

2.  Tax Procedures

Our Comments

Public Clarification brings in a welcome change whereby the specified business iterations carried out with the Designated Zones would be considered outside the scope of UAE VAT, subject to fulfillment of prescribed conditions. This would help attract investments in UAE and enhance the future eligible investment decisions to establish or expand themselves in the designated zones.

Furthermore, the change in procedure seems to be in relation to developments and enhancement plans for tax legislation and procedures. It will give breathing space to the business to appeal or object against any tax disputes. This will help to increase tax compliance and more legitimate litigations will be made with tax authorities.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.