What are some examples of supplies made in a Designated Zone and their UAE VAT treatment?
The following table provides examples of VAT treatment of supplies taking place in a Designated Zone.
| Examples of Supply | VAT Treatment | Reason for VAT Treatment |
|---|---|---|
| Trading stocks bought by businesses in order to resell them | Outside the scope of VAT | Goods bought for the purpose of reselling are not treated as consumption of goods as per Article 51 (5) of the VAT Executive Regulations. |
| An oil equipment manufacturer in a Designated Zone buys steel in order to produce the equipment. | Outside the scope of VAT | The manufacturer uses the steel to produce equipment and does not directly consume the steel. The general place of supply rule as per Article 51 (5) of the VAT Executive Regulations will not apply. |
| A manufacturer buys tools that will be used to produce goods. | Outside the scope of VAT | Even though the manufacturer directly consumes the purchased tools, the goods produced with these tools are not consumed by the manufacturer. The general place of supply rule as per Article 51 (5) of the VAT Executive Regulations will not apply. |
| A business owner in the Designated Zone buys stationery, food, a company car, a laptop, and other things that are used for the purpose of running a business. | Normal VAT rules apply | The goods bought will be directly consumed by the business. These goods will not be incorporated into, attached to, or made a part of another good or its production. So this sale will be within the scope of UAE VAT. |
| A manufacturer in the Designated Zone buys a computer to design goods before he manufactures them. | Normal VAT rules apply | This computer is not used for the production of goods, even though it is used to design the goods. Therefore, normal VAT rules will apply for this sale. |
| A person buys goods in the Designated Zone to use them for personal purposes. | Normal VAT rules apply | If the goods are not used for business purposes, then the normal VAT rules will apply. |