Why Free Zone and Mainland Trade Are Treated Differently
A Free Zone is a geographically and legally defined business jurisdiction with its own licensing authority and operating rules.
A Free Zone company is authorised to conduct activities under its Free Zone ਲਾਇਸੰਸ. Its ਲਾਇਸੰਸ does not automatically become a mainland commercial ਲਾਇਸੰਸ.
When goods move from a Free Zone or Designated Zone into the mainland, the movement can also trigger:
The commercial contract and physical movement of the goods must be planned together.
"Free Zone" and "Designated Zone" are not interchangeable terms for VAT purposes.
A Free Zone is established under the relevant ਯੂਏਈ legal and licensing framework.
A Designated Zone is a specific area recognised under a Cabinet Decision for particular VAT treatment, provided the applicable conditions are satisfied.
Every Designated Zone is associated with a Free Zone framework.
- Customs clearance
- Customs duty
- Import VAT
- Importer-of-record responsibility
- Product-registration requirements
- Municipality controls
- Conformity requirements
- Excise Tax where relevant
- Warehouse and transport documentation
- Free Zone Does Not Always Mean Designated Zone
- Therefore:
- Route 1: Sell Through a Licensed Mainland Distributor