Are mainland sales by a free zone company subject to VAT?

Article 51 – Designated zones30 1. Any Designated Zone specified by a decision of the Cabinet shall be treated as being outside the State and outside the Implementing States, subject to the following conditions: a. The Designated Zone is a specific fenced geographic area and has security measures and Customs controls in place to monitor entry and exit of individuals and movement of goods to and from the area. b. The Designated Zone shall have internal procedures regarding the method of keeping, storing and processing of Goods therein. c. The operator of the Designated Zone complies with the procedures set by the Authority. 30 Article amended as per Cabinet Decision No.88 of 2021. Cabinet Decision No. 52 of 2017 and its amendments – As published by the Ministry of Finance 39 2. Where the Designated Zone changes the manner of operating or breaches any of the conditions based on which the area was specified as a Designated Zone under a decision issued by the Cabinet, the Designated Zone will be treated as if inside the State. 3. The transfer of Goods between Designated Zones shall not be subject to Tax if the following two conditions are met: a. Where the Goods, or part thereof, are not released, and are not in any way used or altered during the transfer between the Designated Zones. b. Where the transfer is undertaken in accordance with the rules for customs suspension according to GCC Common Customs Law. 4. Where Goods are moved between Designated Zones, the Authority may require the owner of the Goods to provide a financial guarantee for the payment of Tax, which that Person may become liable for should the conditions for movement of Goods not be met. 5. Where a supply of Goods is made within a Designated Zone to a Person to be consumed by him or another person, then the place of supply of these Goods shall be in the State except in any of the following cases: a. The purpose was to incorporate the Goods into, attach the Goods to, or that the Goods become part of or are used in the production of another Good in the same Designated Zone and such Good is not consumed. b. The Goods were delivered to a place outside the State, and the Supplier retains supporting commercial or official evidence proving that, and customs evidence proving that the Goods were removed from the Designated Zone. c. The Goods were moved from the Designated Zone to a place inside the State, and the Supplier retains official evidence establishing that VAT had been applied on that import. 6. The place of supply of any Services is considered to be inside the State if the place of supply is in the Designated Zone. 7. As an exception to Clause 6 of this Article, the place of supply of any services shall be outside the State, where shipping or delivery services are supplied directly in connection with Goods that have a place of supply outside the State according to paragraphs (b) and (c) of Clause 5 of this Article, and all of the following conditions are met: a. Shipping or delivery services are supplied by the same supplier of the Goods; b. The supplier of the Goods is a Non-Resident, and not registered for Tax; c. These Goods are sold via an Electronic Sales Platform; an Electronic Sales Platform refers to any type of online sales platform, including websites and Cabinet Decision No. 52 of 2017 and its amendments – As published by the Ministry of Finance 40 electronic applications, which brings together third-party sellers and buyers, and through which Goods may be sold and purchased with or without shipping or delivery services; d. The person owning the Electronic Sales Platform is not the supplier of the Goods. 8. The Place of supply of water or any form of energy shall be considered to be inside the State if the place of supply is in a Designated Zone. 9. Goods located in a Designated Zone which the owner has not paid Tax on will be treated as Imported into the State if: a. The Goods are consumed by the owner unless they are incorporated into, attached to or otherwise form part of or are used in the production of another Good located in a Designated Zone which itself is not consumed. b. There is shortage in Goods. 10. Any Person established, registered or which has a Place of Residence in a Designated Zone shall be deemed to have a Place of Residence in the State for the purposes of the Decree-Law. Title Ten – Calculation of Due Tax

Article 27 - Place of Supply of Goods14 1. The place of supply of Goods shall be in the State if the supply was made in the State and does not include Export from or Import into the State. 2. The place of supply of installed or assembled Goods if exported from or imported into the State shall be: 13 Article amended as per Federal Decree-Law No. 18 of 2022. 14 Article amended as per Federal Decree-Law No. 18 of 2022. Federal Decree-Law No. 8 of 2017 and its amendments – As published by the Ministry of Finance 15 a. In the State, if assembly or installation of the Goods was done in the State. b. Outside the State, if assembly or installation of the Goods was done outside the State. 3. The place of supply of Goods that includes Export or Import shall be as follows: a. Inside the State in the following instances: 1) If the supply includes exporting to a place outside the Implementing States. 2) If the Recipient of Goods in an Implementing State is not registered for Tax in the state of destination, and the total exports from the same supplier to this state do not exceed the Mandatory Registration Threshold for such state. 3) If the Recipient of Goods in the State does not have a Tax Registration Number, and the total exports from the same supplier in an Implementing State to the State exceeds the Mandatory Registration Threshold. 4) If Clause 1 of Article 26 of this Decree-Law applies, and the ownership of Goods is transferred in the State. b. Outside the State in the following instances: 1) If the supply includes an Export to a customer registered for Tax purposes in one of the Implementing States. 2) If the Recipient of Goods is not registered for Tax in the Implementing State to which Export is made, and the total exports from the same supplier to this Implementing State exceeds the Mandatory Registration Threshold for such state. 3) If the Recipient of Goods does not have a Tax Registration Number and the Goods are imported from a supplier registered for Tax in an Implementing State from which Import is made, and the total value of imported Goods from the same supplier to the State do not exceed the Mandatory Registration Threshold. 4. Goods shall not be treated as exported outside the State and then reimported if such Goods are supplied in the State and this supply required that the Goods exit and then re-enter the State according to the instances specified in the Executive Regulation of this Decree-Law.