UAE: Revised VAT rules regarding “designated zones” and goods sold via electronic platforms

The amendments are effective 29 October 2021.

Goods sold via electronic platforms

The UAE Cabinet in October 2021 issued guidance—Decision No. 88 of 2021—that amends the value added tax (VAT) rules regarding “designated zones.”

The amendments are effective 29 October 2021.

The VAT regulations (specifically Article 51(5)) are amended to revise the rules for the following situations when the supply of goods within a designated zone will be treated as having a place of supply outside the UAE so that the supply of the goods will not be subject to (or will be outside the scope of) VAT in the UAE.

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

Shipping and delivery services

Existing Article 51(6) of the VAT regulations treats the supply of services within a designated zone as having the place of supply inside the UAE and therefore is subject to VAT. New Article 51(7) has been added to provide an exception to this rule for shipping and delivery services.

There are a number of cumulative conditions that need to be satisfied to qualify for this exception—namely, the services need to relate to goods supplied by a non-resident and unregistered entity, and only if the goods are being sold through an independent electronic platform (which itself cannot be the owner of the goods).

When the supply of the goods will be out of scope by virtue of revised Article 51(5), the related shipping and delivery services will then also be out of scope. 

KPMG observation

Businesses using third-party online platforms need to consider reviewing their VAT positions and clarifying what may be an ambiguous position to avoid penalties.

Read an October 2021 report prepared by the KPMG member firm in the United Arab Emirates 


The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.