UAE VAT Compliance in the Meydan Free Zone

UAE VAT Compliance in the Meydan Free Zone

Understanding VAT in the UAE

• The UAE introduced VAT at a standard rate of 5% on most goods and services from January 1, 2018. As a consumption tax, VAT is levied on the supply of goods and services within the UAE, and on imports into the UAE.

• Even though free zones like Meydan offer commercial advantages, this does not mean VAT exemption as a default. Whether transactions attract VAT depends on the type of free zone and the nature of supplies.

Is Meydan Free Zone a “Designated Zone” for VAT?

Importantly, Meydan Free Zone is considered a non-designated zone for VAT purposes. That means it does not qualify for the special VAT treatment reserved for designated zones (like JAFZA or DAFZA), which are treated as outside the UAE for certain goods supplies.

As a result:

• Standard VAT rules apply to all taxable supplies of goods and services made by Meydan Free Zone companies — just like on the UAE mainland.

VAT Registration: Thresholds Everything Business Owners Should Know

All Meydan Free Zone businesses must register for VAT with the Federal Tax Authority (FTA) if they meet the established criteria:

Mandatory VAT Registration

• If a business’s taxable supplies and imports exceed AED 375,000 in the previous 12 months, VAT registration is mandatory.

Voluntary VAT Registration

• Businesses with taxable supplies between AED 187,500 and AED 375,000 may choose to register voluntarily. This allows them to recover input VAT on eligible expenses even before reaching the mandatory threshold.

• Once registered, companies obtain a Tax Registration Number (TRN) and must comply with ongoing VAT reporting and payment obligations.

How VAT Works for Meydan Free Zone Companies

Being in a non-designated free zone means standard VAT treatment applies across the board. Here’s how VAT typically applies for different types of transactions:

Local Sales and Services

• Sales of goods within the UAE — including B2B and B2C — are subject to 5% VAT.

• Services provided to UAE customers are similarly taxable at 5%.

Transactions with Other Free Zones

• Sales to other non-designated free zones are also taxable at 5%, like mainland transactions

Exports and GCC Sales

• Exports of goods and services to outside the UAE are typically zero-rated (0%), provided proper documentation and evidence are retained.

• Sales to VAT-registered buyers in GCC countries may qualify for 0% VAT if all conditions are satisfied.

VAT Invoicing and Record-Keeping

To stay compliant, Meydan Free Zone companies must:

Issue VAT-Compliant Invoices

• Invoices must include:

• Supplier’s TRN

• Customer details

• Description of goods/services

• VAT amount and total price Timely and correct VAT invoicing helps ensure smooth compliance and audit readiness.

Maintain Proper Records

Entities must retain VAT records for at least five years, including:

• Sales & purchase invoices

• Customs documentation

• Bank statements

• VAT returns filed

• These documents are crucial in case of FTA audits or refund claims.

VAT Invoicing and Record-Keeping

To stay compliant, Meydan Free Zone companies must:

Issue VAT-Compliant Invoices

• Invoices must include:

• Supplier’s TRN

• Customer details

• Description of goods/services

• VAT amount and total price Timely and correct VAT invoicing helps ensure smooth compliance and audit readiness.

Maintain Proper Records

Entities must retain VAT records for at least five years, including:

• Sales & purchase invoices

• Customs documentation

• Bank statements

• VAT returns filed

• These documents are crucial in case of FTA audits or refund claims.

VAT Return Filing and Payment Deadlines

• Once registered, businesses must submit VAT returns — typically quarterly, though the FTA may assign different tax periods based on turnover. VAT owed must be paid within 28 days from the end of the tax period.

• Late filings or payments can result in penalties and interest charges, making strict adherence essential.

How Meydan Free Zone Can Help with VAT Compliance

• Meydan offers administrative support like Meydan Plus, helping businesses with VAT registration, filing, and ongoing compliance. This service can be especially beneficial for startups and companies new to the UAE tax environment

Common VAT Mistakes to Avoid

• Assuming Free Zone status equals VAT exemption – VAT applies unless the zone qualifies as a designated zone.

• Delaying registration past the threshold – leads to penalties.

• Incorrect or missing invoices – creates compliance risk.

• Incomplete record-keeping – jeopardizes audits and refund claims.