Free zones in UAE
Businesses wishing to operate in Dubai should be aware that several zones, known as ‘free zones’, have been established to ease foreign investment in Dubai. However, businesses operating within a free zone are restricted over the types of dealings they may conduct outside the designated free zones. Businesses wishing to conduct business in the mainland UAE must comply with the requirements of the Companies Law and other relevant laws applicable to the respective industry.
Companies incorporated and operating within the free zones are not subject to many of the restrictions imposed by the Companies Law and other UAE laws and regulations. Entities operating within the free zone may be wholly owned by foreigners, who benefit from a guarantee that tax will not be applied for a certain period, notwithstanding any subsequent change to federal or local laws.
There are around 30 free zones in Dubai including the Dubai International Financial Centre (DIFC), the Jebel Ali Free Zone (JAFZ), the Dubai Airport Free Zone (DAFZ), the Dubai Technology and Media Free Zone (TECOM), the Dubai Health Care City, the Dubai Multi Commodities Centre and the Gold and Diamond Park etc…
The JAFZ is the largest and oldest free zone in Dubai; it was established in 1985.
Each free zone is governed by an independent free zone authority (FZA), which, among other things, is responsible for drafting and implementing the zone’s regulations, policies and strategies and for issuing the necessary operating licenses for operation within the zone.
The companies operating in the Free Zones are treated as being offshore or outside the UAE for legal purposes.
The free zones are suitable for companies intending to use UAE as a regional manufacturing or distribution base, with the bulk of their business outside the UAE.
Type of Entity:
A UAE Free Zone Company can be established in the following ways:
A branch of an existing company
Foreign Branch – A foreign affiliate that is legally a part of a firm residing outside of the UAE
Local Branch – A domestic affiliate that is legally a part of a firm residing in the UAE
A new establishment
Free Zone Company (FZCO) – A new business entity which is owned by 2 – 5 partners.
Free Zone Establishment (FZE) – A new business entity with a sole business owner.
Such companies can be owned 100% by foreign investor with no involvement of local partner or sponsor.
A UAE Free Zone company offers the following incentives to investors:
- 100% foreign ownership.
- No corporate taxation for 50 years – a concession that’s renewable.
- Freedom to repatriate capital and income in totality
- No personal income tax.
- Full exemption from import duties.
- No currency restrictions
- No bureaucratic red-tape.
- No recruitment problems.
- Modern efficient communication
- State of the art infrastructure.
- Abundant energy.
- Attractive working environment.
- Owned premises on leased land can be mortgaged.
Types of Licenses:
Activities allowed: Import raw materials, manufacturing, processing, assembling, packaging, and exporting finished products.
Activities allowed: Import, export, distribution, consolidation, storage or warehousing of items specified on the License. Maximum limit is seven similar product lines.
Consulting and Service License
Activities allowed: Offering consulting services in management, finance, investment, legal issues, labor relations, economics (including feasibility studies), industrial development, marketing, and related subjects. Other services include logistical support such as: restaurants or food outlets, catering services, travel agencies, leisure and social activities, insurance, cargo & freight forwarding, accounting, and audition services.
Commercial – General Trading License
A General Trading License can be obtained under a Commercial License, which allows for more than seven product lines.