An alternate name for Free Zones is Free Trade Zones. They come under the broader banner of special economic zones. Free zones can be defined as a region where goods may be manufactured, restructured, stored, or re-exported under specific customs regulation. The zones are designed to be owned 100% by expatriates for single-window administration convenience. The free zones are especially created to boost international business. Free zones are commonly found around seaports and international airports.
Setting up a business in free zones is preferable because the establishment is exempt from the laws governing the region. There are no customs requirements and other restrictions. The government authority in power provides ample aid to the incorporated company as it is to their benefit if the company flourishes. As long as the established rules and regulations are adhered to, there is no need for fear and adverse reactions of the government.
Unlike traditional companies where a UAE citizen is required to hold majority shares, a company in the free zone can be held entirely by a foreign national. This has resulted in added popularity for having a business registered in free zones. Free zones, as set up by the UAE government, have each been designed for specific business activities. There are upward of 40 free zones in the UAE, with over 200,000 companies registered, which in turn has led to a growth in Gross Domestic Product (GDP) for the UAE.
United Arab Emirates (UAE) government has introduced free zones due to growth in business opportunities. This opportunity has been provided to encourage foreign investments, boost economic growth, and drive operations in the UAE. There are many benefits the investors can attain from these free zones, prominent among them is complete ownership and enjoying tax exemptions.
Before setting up a business in the free zones, it is essential to understand the advantages and disadvantages attached to them.
Advantages of Operating in Free Zones
- The investors enjoy full 100% ownership.
- Exemption from all import and export duties
- 100% repatriation of capital and profits
- Companies can operate for 24 hours of the day for 7 days a week
- No personal income taxes
- Inexpensive workforce
Disadvantages of Operating in Free Zones
- Confined to free zones
- No direct trade with the UAE market – Can only operate through local distributors
- Companies can only engage in those activities for which a free zone has been established