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Free Zones in the UAE

Free Zones in the UAE

The rapid universal development of science and technology has led to a worldwide economic revival.

The benefits of this revival include the less inhibited transfer of economic trade information across borders as well as the increase in international trade and economic development. 

This trend of economic globalization further means the opening up of a wide field for the flow of capital, foreign investment, trade exchange, and more economic interdependence among the countries of the world.

The Capabilities of the UAE Infrastructure in the Field of Free Zones

Free Zones are economic areas where goods and services can be traded, usually at preferential tax and customs rates. 

Each Free Zone within the UAE is a separate and distinct entity with its own Free Zone Authority. This Authority governs, handles registration and issues licenses within the Free Zone. Although there are numerous Free Zones across the UAE, the basic principles remain the same.

There are now more than 50 Free zones established throughout the UAE in the fields of, amongst others, industry, trade, health, technology, education, engineering and technical consultancy etc. 

Dubai has certainly taken the lead in this field, establishing more than 30 distinct free zones providing commercial services to a wide range of investors and companies. These commercial services are characterized by structural flexibility, quick and easy procedures for company incorporation, and the use of modern technology in the establishment and management of companies.

Advantages of Free Zones

Free zones are commercial zones established with the view to create and increase commercial traffic as well as to attract domestic and foreign investment. 

The UAE government started exploring the Free Zone concept thirty-five years ago, in an effort to boost international business in the region. Consequently, the first Free Zone was established in the Jebel Ali region in 1985.

Some of the most notable advantages of incorporating a company in a Free Zone include, amongst others:

  • 100% ownership without the aid of UAE sponsor.
  • Exemption from personal income tax and capital gain tax.
  • Exemption from corporate tax.
  • Customs Tax exemptions on exports and imports.
  • Quick and easy business set-up.
  • Access to modern IT and communications infrastructure.
  • Less stringent visa restrictions, thus making recruitment simpler.
  • Access to pre-existing buildings, offices, factories and warehouses etc.

Read also: Procedure for Obtaining an E-Commerce License in UAE

Governing Laws 

The United Arab Emirates has put in place laws to ensure effective and continued management and regulation of the Free Zones. The most relevant legislation in this regard is Federal Law No. 8 of 2004 regarding Financial Free Zones including, in accordance with Cabinet Decision No. 28, the Executive Regulations to Federal Law. No. 8 of 2004 regarding Financial Free Zones.

Prohibited Goods

The UAE has prepared a list of prohibitions in respect of certain types of goods which may not be traded within the Free Zones. 

This list is based on the nature and/or source of these goods and is in accordance with the provisions of the Unified Customs Law of the Gulf Cooperation Council States and other related laws. The import, storage, or transfer of any of the items classified as prohibited goods is a crime punishable in terms of UAE law.

Prohibited Goods include:

  • All types of military weapons, ammunition and explosives except those licensed by the competent authorities.
  • All flammable goods.  This prohibition excludes fuels, and goods permitted by the authorities regulating the free zones and duty-free shops, under the conditions set by the competent authorities.
  • Radioactive materials.
  • Goods in violation of the regulations relating to the protection of commercial, industrial, literary and artistic property.
  • Drugs of all kinds, and their derivatives.
  • Goods originating from a country which is the subject of an economic boycott.

Read also: Establishing a Company in the Jebel Ali Free Zone

General Customs Conditions for Importing into the Free Zone:

  • The importer must obtain an importer code from the customs authority.
  • The imported goods must be identical to the activity displayed in the trade license of the importer.
  • The imported goods must arrive in the Free Zone within 72 hours from the date of the customs declaration.
  • The holder of the license shall not open, change or dispose of the goods before they have arrived in the Free Zone and have been certified by the customs authority.
  • The goods must be inspected by the customs authority as they enter the free zone, or as they are transferred to warehouses.
  • A fine of 500 dirhams will be payable in the event that the importer is unable to produce any required documentation.
  • The establishment, company or commercial entity authorized to operate within the Free Zone by importing goods from a foreign country shall be exempted from paying customs duties, and he shall pay customs duties only if the goods are subsequently transferred to other Free Zones within the UAE.

In order to facilitate investment and stimulate economic growth, the state has provided large warehouses and many UAE ports and allocated them to companies that wish to store their imported goods or wish to re-export such goods. In such cases, a security deposit must be paid and it will be returned upon re-export of the goods.