The UAE Cabinet has issued Decision No. 88 of 2021 as part of the Official Gazette on 14 October 2021, amending Article 51 of the UAE VAT Executive Regulations (“Regulations”) concerning the provisions relating to Designated Zones.

Effective date

The amendments will be effective from 15 days after publication of the decision in the Official Gazette, i.e. 29 October 2021.

Sub-article 5 of the Regulations amended

As a result of the Cabinet Decision, Article 51(5) has been amended to revise the scenarios in which the supply of goods within a Designated Zone will be treated having a place of supply outside the UAE, such that the supply of the goods will be outside the scope of UAE VAT:

  1. The goods were intended to be incorporated into or used in the production of other goods in the Designated Zone;
  2. The goods are delivered to a place outside the UAE (as supported by official and commercial evidence kept by the supplier);
  3. Where the goods are imported from the Designated Zone to the mainland UAE (supported by proof that import VAT has been paid).

Sub-Article 7 added in the Regulations

The existing Article 51(6) treats the supply of services within a Designated Zone as having the place of supply in the UAE and therefore within the scope of VAT. New Article 51(7) has been added to provide an exception to that rule, specifically for shipping and delivery services. There are a number of cumulative conditions that need to be fulfilled in order to qualify for such exception, namely the services need to relate to goods supplied by a non-resident and unregistered entity, and only if they are being sold through an independent electronic platform (which itself cannot be the owner of the goods). Whereas the supply of the goods will be out of scope by virtue of the revised Article 51(5), the related shipping and delivery services will then also be out of scope. 


Businesses using third-party online platforms should consider reviewing their VAT positions and seek clarity where the position is ambiguous to avoid onerous penal consequences. 

For more information on the latest amendment, please get in touch with your usual KPMG contact or any of the contacts below.

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