The free zones in UAE are special geographically defined areas that permit 100% foreign ownership often dedicated to specific industry. These areas were formed so as to support strategic transformation in key industries and many are built with public finance and claim state of the art facilities. Each of these free zones has its own set of exclusive requirements related to capital requirements, permitted activities, office or warehouse space, with each having the relevant licenses and legislation to enable their industry to flourish.
The history of Free Zones can be dated prior to the formation of the UAE. Even then, the UAE acted as a strategic trading location with ‘dhows’ berthed at its creek to unload cargo and sail towards their destination. By early 2000s, Free Zones had spread across the UAE, with every Emirate hosting at least one Free Zone. At that time, the trend towards more specialized Free Zones started to crystallize. The success of Free Zones inspired business people of different sectors to launch their own business within a Free Zone that exclusively included activities in their specific field. The specialization of the Free Zone industry is an incentive for entrepreneurs, as access to a hub of specialized knowledge is intrinsically provided.
Primarily, starting a business within a Free Zone in the UAE exempts you from the duties usually imposed on foreign trading. There is no restriction on transference of profits to another country and one is not required to have a local partner to start their business. Foreign ownership is possible irrespective of the nationality of the investor, absence of currency regulations which makes financial transactions easier, 100% repatriation of capital and profits, 100% import and export tax exemption, 100% exemption from income and corporate taxes, smooth labour recruitment; readily available workspaces.
One of the many attractions of the Freezones include these Freezones being exempted from Federal laws governing the rest of the Emirate. Article 121 of the UAE Constitution enabled the Federation to create Financial Free Zones in the Emirates, and most importantly, to exclude the application of certain Federal laws and commercial laws in these Financial Free Zones. Most of the freezones have their own rules and regulations/laws (closely modelled around common laws) governing them and they are specific to the industry or business.
For further information, please contact:
Akshat Vikram Pande, Partner, Alpha Rajan & Partners
akshat@alpha-partners.org
