UAE VAT Compliance for Businesses in Dubai Internet City Free Zone

UAE VAT Compliance for Businesses in Dubai Internet City Free Zone

VAT Applicability in Dubai Internet City Free Zone

Dubai Internet City is classified as a Non-Designated Free Zone for VAT purposes. This means that standard UAE VAT rules apply, similar to mainland businesses.

Key implications include:

• Supplies of goods and services within DIC are generally subject to 5% VAT

• Transactions between DIC companies and mainland UAE entities attract 5% VAT

• Supplies between DIC and other non-designated free zones are also taxable at 5% VAT

• Exports of goods and services outside the UAE may qualify for zero-rated VAT (0%), subject to condition.

VAT Registration Requirements for DIC Companies

A business registered in Dubai Internet City must register for VAT if:

• Its annual taxable turnover exceeds AED 375,000, or

• It expects to exceed this threshold within the next 30 days

Businesses with taxable turnover between AED 187,500 and AED 375,000 may opt for voluntary VAT registration, which is often beneficial for startups and tech firms with high initial expenses, as it allows recovery of input VAT.

VAT registration is completed through the Federal Tax Authority (FTA) portal, and once approved, the business receives a Tax Registration Number (TRN).

VAT on Services and Technology Businesses in DIC

Most companies in Dubai Internet City provide services rather than goods, making VAT treatment highly dependent on the place of supply rules

Common scenarios:

• Services provided to UAE-based clients → Subject to 5% VAT

• Services provided to overseas clients (outside UAE) → Generally zero-rated, provided the client is outside the UAE and the service is not consumed locally

• Digital, consulting, IT, and software services → Usually taxable unless zero-rating conditions are met Correct classification and documentation are essential to apply the appropriate VAT rate.

VAT Return Filing and Ongoing Compliance

Once registered, DIC companies must comply with ongoing VAT obligations, including:

VAT Return Filing: Usually on a quarterly basis (monthly in some cases, as assigned by the FTA)

VAT Payments: VAT due must be paid within 28 days after the end of the tax period

Tax Invoices: All invoices must be VAT-compliant and include:

• TRN

• VAT amount

• VAT rate applied

• Supplier and customer details

• Record Keeping: Accounting records must be maintained for a minimum of 5 years Late registration, incorrect filings, or missed deadlines can result in significant penalties imposed by the FTA.

Common VAT Challenges Faced by DIC Companies

Businesses in Dubai Internet City often face VAT challenges such as:

• Incorrect VAT treatment of cross-border services

• Misclassification of zero-rated vs standard-rated supplies

• Poor invoice compliance

• Missed VAT filing deadlines

• Errors in input VAT recovery

• Professional VAT advisory can significantly reduce compliance risks and financial exposure.

How VAT-Gupta Accountants Can Help DIC Free Zone Companies

At VAT-Gupta Accountants, we specialize in providing end-to-end VAT compliance services for free zone and mainland businesses across the UAE, including Dubai Internet City.

Our services include:

• VAT registration and deregistration with the FTA

• VAT return preparation and filing

• VAT advisory for service-based and tech companies

• Input VAT review and optimisation

• VAT compliance health checks and audits

• Ongoing VAT support and advisory

• We help ensure your DIC business remains fully compliant while optimising tax efficiency and minimizing risks.