From Designated Zone to the GCC: When "Import to Local"

 

 

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How a Dubai-based Free Zone company safeguarded its corporate tax benefits through compliance clarity and documentation discipline.

The Trade That Raised a Flag Not long ago, a Dubai-based trading company operating within a Designated Zone was preparing to ship a bulk consignment of electrical equipment to a long-standing distributor in Oman.

Everything about the deal was straightforward:

• Buyer based in Muscat.
• Goods stored and sold from the company’s JAFZA warehouse.
• Transport arranged via a third-party logistics provider.
• Invoicing aligned with the Incoterm DAP Oman.

But the curveball came at the Dubai Customs gate. Due to internal procedural norms, the logistics agent processed the clearance under the “Import to Local from FZ” form, typically associated with moving goods into the UAE mainland, not exports.

When the company’s finance team later reviewed the customs declaration, a chill ran down their spine, "Did we just trigger a domestic supply and lose our Qualifying Free Zone Person (QFZP) status?"

Understanding the Risk - Under Ministerial Decision No. 265 of 2023, income from the distribution of goods from a Designated Zone to a foreign customer can qualify for the 0% corporate tax rate, but only if the goods don’t get routed through the mainland in a way that changes their destination or tax treatment.

The customs form was enough to raise questions.

Do we really need to look at the documents, with a magnifying glass to assess these points, and are these points important ?

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