The history of Free Zones in the UAE dates to more than 30 years ago, when the first free zone was established in 1985, in Jebel Ali area in Dubai.
The Free Zone concept was developed to diversify the economy, attract new business and foreign investment. The Free Zones success has contributed greatly to the UAE's vision for the future; a vision which has been more recently strengthened and brought into play through EXPO 2020. EXPO 2020 is the first World EXPO in the MENA region that holds the promise of further improving the UAE's position as one of the world's biggest and one of the most attractive international business hubs globally.
So, what is a Free Zone and why choose one?
Free Zones or Free Trade Zones, are designated areas within the UAE, offering special tax, customs and import regimes and governed by their own framework of regulations (except UAE criminal law). Originally organized around major seaports, airports, and areas geographically advantageous for trade; Free Zones offer a wide variety of other benefits such as:
- 100% Ownership: Free Zones offer 100% foreign ownership for investors without the need of a local agent.
- Taxes: Free Zones have no currency restrictions and a distinguished taxation system that offers 0% corporate and personal tax, contributing to 100% repatriation of capital and profits.
- Simple Setup Process: Free Zones offer cost-effective setup packages, with minimal corporate and personal documents and information, some Free Zones require a one-time visit for the setup process, while some Free Zones offer completely remote company setup, with verification happening through video calls.
- Strategic Location and Infrastructure: Free Zones are in vital areas in UAE, making trading, exporting, and importing accessible, and offering a variety of offices solutions from co-working shared space to full scale warehouses and land plots for development.
- Residency: Unlike an Offshore setup, a Free Zone company offers the opportunity to obtain a renewable 3-year residency visa, with the number of visas depending on the chosen activity and office solution.
- Bank Account: The banks in the UAE operate on a risk-based approach to account opening, to further understand the customer's primary business, the anticipated total deposits, revenues and its main customers and suppliers. Free Zones have a strong reputation and with a Free Zone license it is possible to apply and obtain a personal and corporate bank account in any of the UAE's banks.
Choosing the right Free Zone for you
There are more than 45 Free Zones across the UAE, with the highest concentration being in Dubai. Each Free Zone has its own regulations around the activities which are allowed to be performed within the Free Zone, as well as rules relating to the number of business activities allowed using the same business license.
To choose the right Free Zone, one would have to take into consideration the following:
- Type of business activity and if the chosen activity requires external approval. Some activities require approval from other government entities, such as: Securities and Commodities Authority (SCA), Roads and Transport Authority (RTA) and others.
- The share capital requirement of the Free Zone. Some Free Zones require proof of deposited share capital in the business account of the incorporated company (for example: bank statement or a deposit receipt), whilst other Free Zones do not impose such requirement.
- The location – each Free Zone provides activities related to its location. Free Zones that mostly include trading and logistics are usually located next to major ports and airports. Other Free Zones that offer service centric and corporate solutions are stationed more in the city next to major service outlets.
- The facilities type required – for example the need for a more "luxurious" and fully serviced office environment within the tall skyscrapers of Dubai or the need for a shared office.
- Corporate structure – different Zones offer different ranges of corporate structures such as: Free Zone Company (FZCO), Free Zone Establishment (FZE), Free Zone Limited Liability Company (FZLLC), Single and Multi-Family Offices (SFO/ MFO) and the ability to incorporate a branch for a foreign company.
Some of the most highly ranked Free Zones explained: –
- Dubai Multi Commodities Center (DMCC)
Established by the Government of Dubai to provide a physical market and financial infrastructure, with more than 19,000 registered members as of 2021, DMCC is the seven-time winner of Global #1 Free Zone of the year, by the FDI magazine. It is centrally located in Dubai's Jumeirah Lakes Towers district and is the largest free Zone in the region, making it an ideal choice for companies operating in the financial or commodities sector. It is also the only Free Zone that offers freehold options.
- Dubai Airport Free Zone (DAFZA)
Benefitting from direct access to the world's busiest international airport, DAFZA offers multiple types of licenses, such as trade, services, industrial and e-commerce, for companies specialized in manufacturing, trading, and technology. DAFZA is now home to more than 1,800 registered companies and 17,000 professionals.
- Jebel Ali Free Zone (JAFZA)
Located in the Jebel Ali area in Dubai, next to Abu Dhabi and with direct access to Jebel Ali Sea Port and Al Maktoum International airport. In over 3 decades, JAFZA grew from 19 companies to over 8,000, including nearly 100 Global Fortune 500 enterprises. JAFZA offers licensing in trading, general trading, services, industrial, logistics and e-commerce.
- TECOM Group
TECOM Group is the primary operator for sector-focused business zones for Media, Education, technology, and Design. It has 11 business communities, including Dubai Internet City, Dubai media City, Dubai Sports City and Dubai Outsource City. TECOM group is creating a global hub for over 6,000 companies from SMEs to International companies in different sectors like CNN, MBC, Microsoft, and Siemens.
- Dubai South (DWC)
Established in 2006 and home to Al Maktoum International Airport (the largest Airport in the world once finished), gaining the huge advantage of being the home of the EXPO site, DWC is one of the best-connected Free Zones in the UAE. As you would expect, the DWC provides licenses for aviation and trading services, however, it also caters for logistic, commercial, industrial, and humanitarian services.
- Dubai World Trade Center (DWTC)
The DWTC is located within the prestigious area of the World Trade Center on Sheikh Zayed Road in Dubai. It is a suitable choice to establish a corporate presence, from Small and medium-sized Enterprises (SMEs) to large multinationals and offers license options for commercial, professional, event management, e-commerce, SFO and MFO. DWTC is also reputed for its offices and flexi-desks options at the award winning One Central buildings, strategically positioned at the crossroads of international trade, finance and business.
- Ras Al Khaimah Economic Zone (RAKEZ)
One of the leading Free Zones in industrial and logistics hubs, with more than 15,000 companies across 50 sectors, it offers a wide range of licenses and activities such as commercial, educational, e-commerce, professional, industrial, media, services, and freelance permits. RAKEZ also known for its variety of facilities, as it offers Flexi-desks, offices, customized warehouses, and land plots.
In the post-pandemic world, the UAE keeps moving forward in setting an example for recovery. The EXPO 2020 will have a dynamic direct impact on the UAE's economy and its post event transformation into District 2020 will bring with it the introduction of new Free Zones, expansion of multiple existing Free Zones, as well as new attractive initiatives for upcoming investments. District 2020 is a community designed to support the future of working and living, with prior EXPO 2020 sites being converted to offices and residence solutions.
It is a great advantage for the UAE to have such a high number of Free Zones which are constantly progressing in attempt to diversify their services and communication channels. Results of the UAE's progressive approach are vividly clear as collaboration initiatives between Free Zones and new strategies to stay ahead of competition, are proving to provide a high-quality service to existing and upcoming clients. These reasons allow us to believe that not only do Free Zones play an important role in the UAE and Dubai today but will always be an important and essential part of the UAE growth and the entire GCC region's future.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.