UAE Free Zones – Areas with Special Economic Status in the Country
In modern practice, the advanced system of economic relations is used more and more often. This system provides for the creation of the specialized areas with special economic status on the territory of the country – free trade zones. The so-called free trade zones provide business with a profitable and attractive environment. It is important to note that the country uses such areas to increase the investment activity and to involve the foreign direct investments into the national economy. How many free zones are there in Dubai and other Emirates of the UAE? In this article, we consider the main features and the list of free trade zones of this country.
Free Trade Zones of the UAE: the concept and the purpose
In fact, specialized zones in the UAE are particular areas of the country, with the specific business environment. Preferential terms for implementation of foreign-economic activity are provided on the territory of such free trade economic zones in the UAE. Companies and enterprises registered in a free zone of the UAE are provided with a wide range of investment instruments and completely free economic activity.
Speaking about the main purpose of special free economic areas (free trade zones) in the UAE, several fundamental principles can be singled out:
- Activation and stimulation of the growth of industry in a zone;
- Providing the local market with quality products and goods;
- Development of international trade and foreign economic relations;
- Sectoral development of import and export;
- attracting the direct investments from abroad;
- Stimulation of the development of particular regions and districts;
- The attraction of the highly skilled labor force, etc.
Free Trade economic zones of the UAE with special economic status are characterized by several typical features of the corporate relations of the UAE government and business owners. The loyalty of the UAE Governmental to the investors and entrepreneurs can be reflected in the following:
- No restrictions on the movement, free withdrawal, and distribution of the investment assets and income in the UAE;
- Preferential tax and customs regime of the UAE;
- Freedom in the involvement of the foreign labor force in the UAE.
Varieties and types of the free trade zones of the UAE
Specialized free economic zones can occupy both the territories of the whole regions and the relatively small areas of several square kilometers. In the international practice, free economic zones are divided depending on the orientation of the foreign economic activity and profile, type of the benefits and the strategic goals of the project. Thus, the following economic areas can be singled out among the most popular legal forms:
- Custom territories with the special free status, which offer special conditions on the import and export of goods and services for business;
- Export zones for the industrial sector, which contribute to the development of industrial enterprises which are engaged in exports;
- Zones of free economic trade. These zones are characterized by a complete lack of limitations and quotas for trading;
- Zones for joint venturing, which are created for organizing the joint ventures, for the investors from the different countries;
- Specialized and integrated free economic zones, which can have either a separate scope of activity or combine the multiple activities;
- Technological parks, which, as a rule, are created for the development of progressive and advanced technologies.
The international practice shows that custom territories and export zones are the most effective for the country system. If such free trade zone has the advantageous geographic and economic characteristics for business, they can provide an active development of the national economy. At the same time, such areas should have some characteristics to meet the needs of the potential investors, among them there are:
- Preferential terms for entrepreneurial and economic activity;
- Availability of the necessary social and production infrastructure;
- Availability of efficient transport solutions, respectively, rail, sea, and air transport hubs;
- Relatively low tariffs on service and energy resources;
- Political and economic stability within the country.
It is worth noting that the large free trade economic zones, in the initial stages, require significant investments from the government. First of all, it is necessary for the creation of the appropriate social and production infrastructure of the free trade zone. That is why every major free trade economic zone is a long-term government project, which payback requires a lot of time.
A bit of history of free trading
The international practice has been familiar for a long time with the free trade economic zones. The desire to attract the foreign direct investments and to develop the economy has forced some countries to provide free economic conditions and preferential treatment on the territory of the country.
If to proceed from the traditional concept of the free trade economic zone, we can say that the first of them had appeared in Ireland, at the beginning of 1959. It was then that the authorities had decided to transform the territory of the Shannon International Airport into the free trade area with special economic status. And by 1970th, more than a dozen specialized free areas had existed around the world.
By 1990 free trade zones with a special economic status existed on the territory of 70 countries. According to the statistics of the international financial experts, the total aggregate turnover of such free trade zones was more than 8% of the total world trade.
Let’s consider, as an illustrative example, free zones in the UAE, particularly in the Emirate of Dubai. It is a vivid example when the attractive conditions for business and the unlimited opportunities have become the main incentives for the investors and actively contributed to the national welfare.
The UAE: free trade economic zones in Dubai, the UAE
The phenomenal economic growth, the implementation of the most ambitious and large-scale international projects, excellent climatic conditions and a high standard of living – all these have made Dubai, the UAE the largest travel and financial center in the Middle East.
Recently, the jurisdiction has become even more attractive to potential foreign investors. The government of Dubai, the UAE has determined the specialized areas in the Emirate, where the foreign citizens are allowed to acquire the real estate into the ownership. And it is no longer necessary to attract a local sponsor or a partner for carrying out the entrepreneurial and economic activities.
All the companies, which are registered on the territory of the special free trade economic zones of the UAE, are provided with the long-term tax holidays (up to 50 years). Also, the country gas a free currency exchange market and does not restrict the investors when withdrawing the assets outside the country.
The government of Dubai, the UAE has developed a simplified scheme of registration or incorporation of the foreign company. The entrepreneurs can count on the maximal support from the public authorities. Moreover, the system eliminates the bureaucratic barriers and runaround when registering a company or licensing the entrepreneurial activity in free trade areas. How many free zones are there in Dubai, the UAE?
List of free zones in Dubai, the UAE
- Dubai Academic City – educational sphere;
- Dubai Media City – national communications and mass media;
- Jebel Ali Free Zone – Jebel Ali International Airport;
- Dubai Internet City – communications and information technologies;
- Dubai Outsource Zone – professional outsourcing and consulting;
- Dubai Knowledge Village – recruiting and educational sector;
- Dubai Cars & Automotive Zone – export and re-export of the motor transport;
- Dubai Airport Free Zone – Dubai International Airport;
- Dubai Aid City – activities of the humanitarian public organizations;
- Dubai Metals & Commodities Centre – commodity exchange;
- Gold & Diamond Park – trade in precious stones and metals;
- Dubai Maritime City – shipping and sea transport;
- International Media Production Zone – media technologies and publishing activities;
- Dubai Biotech & Research Park – biotechnologies and researches;
- Dubai Studio City – media market;
- Dubai Healthcare City – health care system and medicine;
- Dubai Silicon Oasis – leading technologies and electronics;
- Dubai International Financial Centre;
- Dubai Industrial City – industrial sector;
- Heavy Equipment & Trucks Free Zone – export and re-export of heavy machinery;
- Dubai Logistics City – an international center for transport logistics;
- Dubai Flower Centre – flower industry
- Auto Spare Parts Zone – spare and component parts;
- Building Material Zone – construction and materials;
- Dubai Carpet Free Zone – carpet products;
- Dubai City Energy – industrial power engineering;
- Dubai Textile City – textile industry;
- Dubai Design Centre – design and home interior.
The choice of an appropriate free trade economic zone in the UAE
First of all, the choice of an appropriate free trade economic area in the UAE is determined to depend on the planned business activity. It should be noted that in Dubai, the UAE almost every free trade area has a certain orientation and profile. It can be eCommerce, trade, automobile industry, publishing, tourism industry, etc.
Potential investors and clients of the free trade economic zones in the UAE are offered modern infrastructure that meets the international standards and which includes the international transport hubs. All free zones of the UAE are the complex clusters, which make it possible to optimize a lot of production processes and, therefore, to reduce the cost of production significantly. All FTZs of the UAE is located in the vicinity of the traffic arteries and have direct access to the urban and social infrastructure.
The procedure of registration of a foreign company in the UAE
You will be required to submit, to the registering authority, a certain set of documents for registration of a foreign legal entity on the territory of special free trade economic zones of the UAE. Registration requirements can differ on the territory of the different FTZ of the UAE, but there is a common list of documents, which can be supplemented. In particular, you will need the following documents:
- Application for registration of the company;
- Copies of the valid foreign passports of the company founders;
- Brief CV on the executives of the company;
- Documentation, which proves the financials of the founders;
- A business plan.
As the registration procedure involves the personal contact with the government registration and regulatory authorities, it is recommended to use the services of the specialized companies or a local agent in the UAE.
Advantages for private business in FTZs of the UAE
Business, which operates on the territory of the special free trade economic zones in Dubai, the UAE can count on the following competitive advantages:
- The possibility of the 100% ownership by foreign citizens in the UAE;
- Provision of the long-term tax remissions and customs facilities in the UAE;
- No restrictions on distribution of the income and withdrawal of the investment assets outside the jurisdiction in the UAE;
- No government currency exchange regulation in the UAE;
- Perfect social and production infrastructure in the UAE;
- Maximum safety and legal security of business in the UAE;
- The possibility of obtaining a residence visa for the founders, their families and employees of the company in the UAE;
- Flexible corporate policy and assistance of the authorities in the UAE.
According to the independent international experts, the following characteristics are relevant among the main criteria of the choice of FTZ in the UAE:
- Location and distance to the major air and seaports in the UAE;
- The infrastructure of the zone and available institutions in the UAE;
- Opportunities for investing in the real estate in the UAE;
- List of the types of the permitted economic activities in the UAE;
- Tariffs on energy resources, utilities, and rent in the UAE;
- The cost of licensing and registration requirements in the UAE;
- Time and financial expenditures for the registration and administration in the UAE
The variety of legal forms for the foreign companies in free zones of the UAE
The current UAE legislation provides for the possibility of registration the following types of companies on the territory of the free economic areas:
- UAE Free Zone Establishment – a legal entity with the sole owner;
- UAE Free Zone Company – the minimal number of founders is two;
- A branch of a local or foreign company in the UAE;
- Offshore companies in the UAE – involvement of the local registered agent is required.
The share capital requirements of the UAE for the registered person can range from 30 thousand to 1 million Dirhams. The exception is the representative offices of the local and foreign companies in the UAE.
To obtain a license in the UAE, a company must have a rented office or service desk. This requirement does not apply to the offshore companies and institutions in the UAE.
Contact us to learn more about the possibilities and advantages of every single free trade economic area in UAE. Get a free consultation and make the right choice.