How will VAT recovery for businesses operating in Designated Zones work?

A business located in a Designated Zone will have to adhere to the normal VAT recovery rules as follows:

• Businesses that make taxable supplies, or make supplies that would be taxable if they took place in the UAE, can recover the VAT paid on expenses in full. 

• Businesses that make supplies that do not give the right to VAT recovery will be unable to recover VAT on expenses that can be directly attributed to making the supply. 

• Businesses need to apportion VAT paid on expenses that are partly recoverable and partly non-recoverable. This is to identify the recoverable part. 

• Businesses must be registered for VAT with the FTA in order to be able to recover VAT.