How does VAT work in designated zones in the UAE?

Some UAE free zones are specifically listed as VAT "designated zones," and these have special rules under the VAT framework administered by the Federal Tax Authority (FTA). A designated zone meeting the legal conditions can, for certain supplies of goods, be treated as outside the UAE for VAT purposes, so movements of goods within or between qualifying designated zones may fall outside the scope of VAT. However, this is not a blanket exemption: services are generally treated as supplied inside the UAE and taxed at the standard 5% rate even when performed in a designated zone, and goods consumed within the zone can be treated as taxable. Not every free zone is a designated zone — only those on the FTA's official list qualify, and they must meet conditions on security and customs controls. Real estate within a designated zone follows its own analysis. Because the rules are nuanced and depend on whether you supply goods or services, confirm your zone's status and treatment with the FTA, and you can compare verified UAE legal and tax professionals on LEXAI for designated-zone structuring.