“VAT Alert: Cabinet Decision No. (59) of 2017 on Designated Zones” — Grant Thornton UAE client alert (2018). NOT the Cabinet Decision itself.

<!-- page 1 ends --> VAT ALERT: Cabinet Decision No. (59) of 2017 on Designated Zones In accordance with Article 51 of the Executive Regulations (read with other provision of the UAE VAT Decree-Law and the Executive Regulations), the FTA has released the following summary with respect to the VAT implications on transactions with a Designated Zone: 1) On the outward supplies by a taxable registered person in a Designated Zone Nature of Nature of Transaction VAT Applicability Supply Designated Zone to Designated Zone Standard Rated Supply of Service Designated Zone to Mainland Standard Rated Zero rated subject to other conditions Designated Zone to Outside UAE being satisfied for export Out of Scope subject to other conditions Designated Zone to Designated Zone being satisfied VAT @ 5% (To be accounted for under Reverse Supply of Goods Designated Zone to mainland Charge Mechanism by the recipient on the mainland, if he is registered under VAT) Designated Zone to Out of Scope outside UAE 2) On the inward supplies by a taxable registered person in a Designated Zone Nature of Supply Nature of Transaction VAT Applicability Designated Zone to Designated Zone Standard Rated Supply of Service Mainland to Designated Zone Standard Rated Standard Rated under Reverse Charge Outside UAE to Designated Zone Mechanism Out of Scope subject to other conditions Designated Zone to Designated Zone being satisfied Supply of Goods Mainland to Designated Zone Standard Rated Outside UAE to Designated Zone Out of Scope We await the practically implementation by both the Customs and the FTA, given there are currently many practical challenges being faced by importers and free zone players. Further, businesses which have not registered for VAT on the understanding that their activities would be outside the scope of UAE VAT, as a result of being wholly conducted within a Designated Zone, should instantly assess their options. Failure to charge VAT where required could lead to administrative penalties being levied by the FTA.

<!-- page 2 ends --> VAT ALERT: Cabinet Decision No. (59) of 2017 on Designated Zones List of Designated Zones as per the Cabinet Decision Abu Dhabi Ajman • Free Trade Zone of Khalifa Port • Ajman Free Zone • Abu Dhabi Airport Free Zone • Khalifa Industrial Zone Umm Al Quwain • Umm Al Quwain Free Trade Zone in Ahmed Dubai Bin Rashid Port • Jebel Ali Free Zone (North-South) • Umm Al Quwain Free Trade Zone on Sheikh • Dubai Cars and Automotive Zone (DUCAMZ) Mohammed Bin Zayed Road • Dubai Textile City • Free Zone Area in Al Quoz Ras Al Khaimah • Free Zone Area in Al Qusais • RAK Free Trade Zone • Dubai Aviation City • RAK Maritime City Free Zone • Dubai Airport Free Zone • RAK Airport Free Zone Sharjah Fujairah • Hamriyah Free Zone • Fujairah Free Zone • Sharjah Airport International Free Zone • FOIZ (Fujairah Oil Industry Zone) How can Grant Thornton help: Grant Thornton’s tax team take a rigorous approach to helping you meet the VAT obligations and requirements set across the GCC, whatever challenges you may face along the way. Using our finely tuned local knowledge and global experience, we help you understand and comply with often complex and time-consuming changes which are required. Our team of specialists have worked with businesses which range in size and industry, alongside supporting government entities in order to support the transition from Phase 1 to full VAT compliance. Contact the VAT team Grant Thornton T +971 4 388 9925 E grantthornton@ae.gt.com grantthornton.ae © 2018 Grant Thornton UAE. All rights reserved. ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton International Ltd (GTIL) and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate, one another and are not liable for one another’s acts or omissions.

<!-- page 3 ends -->