The UAE has 45+ free zones, but only a specific subset hold “designated zone” status under the VAT law. This matters because designated zones have special VAT treatment for the movement of goods — and that treatment is often misunderstood.
This guide covers what a designated zone actually is, the current list across all seven emirates, when designated-zone status helps (goods movement) and when it does not (services and real estate), and how it interacts with the UAE corporate-tax regime.
What Is a Designated Zone?
A “designated zone” is a specific UAE free zone that has been formally designated under the VAT law (Federal Decree-Law No. 8 of 2017 and the related Executive Regulations) as effectively outside the UAE for VAT purposes for the movement of goods. The original list was set by Cabinet Decision No. 59 of 2017 and has been updated periodically since.
Critically: designated-zone status applies to GOODS, not to services. Supply of services within a designated zone is treated like any other UAE supply for VAT. Real estate inside designated zones also follows normal VAT rules.
How a Designated Zone Differs From Other Free Zones?
- Designated zone: movements of goods between two designated zones — or from outside the UAE into a designated zone — are typically outside the scope of UAE VAT, subject to specific conditions.
- Non-designated free zone: goods movements follow normal UAE VAT rules; VAT may apply on local supplies.
- Both: services supplied within either zone are subject to normal UAE VAT (5% standard rate, with normal exemption and zero-rating categories).
Current Designated Zones List (2026)
As of 2026, 27+ free zones across the UAE hold designated-zone status. The list has been amended several times since Cabinet Decision No. 59 of 2017. Always validate against the most recent FTA publication before relying on this list for a specific transaction.
Designated Zones in Abu Dhabi
- Free Trade Zone of Khalifa Port.
- Abu Dhabi Airport Free Zone.
- Khalifa Industrial Zone (KIZAD).
- Al Ain International Airport Free Zone.
- Al Butain International Airport Free Zone.
Designated Zones in Dubai
- Jebel Ali Free Zone (JAFZA) — North and South.
- Dubai Cars and Automotive Zone (DUCAMZ).
- Dubai Textile City.
- Free Zone Area in Al Quoz.
- DAFZA Industrial Park Free Zone, Al Qusais.
- Dubai Aviation City.
- Dubai Airport Free Zone (DAFZA).
- International Humanitarian City, Jebel Ali.
- Dubai CommerCity.
Designated Zones in Sharjah
- Hamriyah Free Zone (HFZA).
- Sharjah Airport International Free Zone (SAIF Zone).
Designated Zones in Ajman
- Ajman Free Zone.
Designated Zones in Umm Al Quwain
- UAQ Free Trade Zone in Ahmed Bin Rashid Port.
- UAQ Free Trade Zone on Sheikh Mohammed Bin Zayed Road.
Designated Zones in Ras Al Khaimah
- RAK Port Free Zone.
- RAK Maritime City Free Zone.
- RAK Airport Free Zone.
- Al Hamra Industrial Zone — Free Zone.
- Al Ghail Industrial Zone — Free Zone.
- Al Hulaila Industrial Zone — Free Zone.
Designated Zones in Fujairah
- Fujairah Free Zone.
- Fujairah Oil Industry Zone (FOIZ).
Explore the complete Dubai free zone list to compare designated and non-designated free zones for trading, logistics, ecommerce and industrial activities.
VAT Treatment in Designated Zones – Goods vs Services
This is the most misunderstood part of designated-zone treatment. The benefits apply ONLY to goods movements.
Goods Movements
- Movement of goods between two designated zones: typically outside the scope of UAE VAT.
- Import of goods from outside the UAE into a designated zone: typically outside the scope of UAE VAT.
- Goods leaving a designated zone for the UAE mainland: treated as an import — 5% VAT applies.
- Goods consumed within the designated zone: typically standard-rated.
Services in Designated Zones
Services supplied within a designated zone are subject to normal UAE VAT rules. There is no “designated-zone” benefit on services. A consultancy operating inside JAFZA charges 5% VAT on services to UAE customers exactly the same way as a mainland consultancy.
Real Estate in Designated Zones
Real estate inside designated zones follows normal UAE VAT rules. Commercial leases are 5%; residential first supply is zero-rated within 3 years of completion; resale is exempt. Designated-zone status has no effect on real-estate VAT.
Corporate Tax in Designated Zones
Designated-zone status is a VAT concept, not a corporate-tax concept. All entities (designated zone or not) are subject to UAE corporate tax under Federal Decree-Law No. 47 of 2022.
Free-zone entities (including those in designated zones) can qualify for 0% on qualifying income under the QFZP regime — Cabinet Decision No. 100 of 2023 sets the framework; Ministerial Decision No. 265 of 2023 defines qualifying and excluded activities. Non-qualifying income is taxed at 9% above AED 375,000. The de-minimis threshold for non-qualifying revenue is the lower of AED 5 million or 5% of total revenue.
Learn which UAE free zones qualify for the 0% corporate tax regime under the QFZP rules and how qualifying income is assessed.
How to Set Up in a Designated Zone?
The setup process is the same as any other UAE free zone, just within one of the designated zones above. Match the zone to your business model:
- Heavy industry, oil & gas: HFZA (Sharjah), FOIZ (Fujairah), Al Hamra / Al Ghail / Al Hulaila (RAK).
- Logistics and port-based trading: JAFZA (Dubai), Khalifa Port FTZ (Abu Dhabi), RAK Port FZ.
- Aviation and airport-adjacent trade: DAFZA (Dubai), Abu Dhabi Airport Free Zone, SAIF Zone (Sharjah).
- E-commerce: Dubai CommerCity.
- Specialised goods trading: DUCAMZ (automotive), Dubai Textile City, International Humanitarian City.
- Cost-conscious general trading: Ajman Free Zone, UAQ Free Trade Zone.
Designated-Zone Compliance Checklist
- VAT registration on EmaraTax if taxable supplies exceed AED 375,000.
- Correct classification of every goods movement (between designated zones, from designated zone to mainland, import into designated zone).
- Customs documentation for every movement of goods crossing the designated-zone boundary.
- Corporate-tax registration on EmaraTax regardless of revenue (AED 10,000 late-registration penalty).
- Monitor the QFZP de-minimis threshold continuously.
- Maintain audited financial statements if claiming QFZP status.
- Transfer-pricing documentation for any related-party transactions.
What We See Most Often (BCL Globiz Experience)?
The #1 misconception we correct on designated-zone setups: clients assume “designated zone” means tax-free for everything. It doesn’t. Designated-zone status helps with VAT on goods movements only. Services charged from a designated-zone entity to a UAE customer are still 5% VAT. Real estate is still normal VAT. Corporate tax still applies — though the entity may qualify for 0% on qualifying income under QFZP.
Most-missed compliance step: classifying goods movements correctly. Goods moving from a designated zone (e.g., JAFZA) to the UAE mainland trigger import VAT at 5%. Clients often miss this and reclaim VAT they shouldn’t have charged, or fail to charge VAT they should have.
Frequently Asked Questions
How many designated zones are there in the UAE?
As of 2026, the UAE has 27+ designated zones across all seven emirates. Dubai and Ras Al Khaimah have the largest concentrations. The number may change over time based on updated Cabinet Decisions.
What is the difference between a designated zone and a free zone?
A designated zone is a specific subset of UAE free zones that holds special VAT status under the VAT law. All designated zones are free zones, but not all free zones are designated zones. The benefit applies to movements of goods between designated zones, not to services or real estate.
Are designated-zone companies exempt from UAE corporate tax?
No. Designated-zone status is a VAT concept, not a corporate-tax concept. All free-zone companies are subject to UAE corporate tax under Federal Decree-Law No. 47 of 2022, but may benefit from a 0% rate on qualifying income if they meet QFZP conditions under Cabinet Decision No. 100 of 2023 and Ministerial Decision No. 265 of 2023. Non-qualifying income is taxed at 9% above AED 375,000.
Do I need to register for VAT if my business is in a designated zone?
Yes. Being in a designated zone does not exempt you from VAT registration. If your taxable supplies and imports exceed AED 375,000 in the preceding 12 months, registration is mandatory. Voluntary registration is available at AED 187,500. Registration is on the FTA’s EmaraTax portal.
What goods movements get the designated-zone benefit?
Movements between two designated zones, and imports from outside the UAE into a designated zone, are typically outside the scope of UAE VAT (subject to specific conditions). Goods leaving a designated zone for the UAE mainland are treated as imports and attract 5% VAT.
Reach out to our experts at info@bcl.ae.
