A free zone refers to a designated area of a city where business or trade can be carried out without having to suffer taxes or restrictions. Free zones are developed to boost up international trade and businesses within a country by granting 100% ownership to expatriates, who wish to start their own business in a foreign country. Free zones allow single window administration convenience.
However, for companies in the free zone to carry out a local business in the country, they cannot go about it directly. On the other hand, they will have to manage local business with the help of locally appointed distributors. When local business is done, custom duty 5% is taken into account.
Companies that wish to start their business in the free zones of a country will be exempted from harsh custom restrictions; however they will have to obey the legal structure that has to be followed when setting up of such a free zone establishment. The administration of the area will help in establishing the firm since such developments is a boost to the economy of the country. Free zone establishments find it easier to setup a workforce that suits the needs, requirements and ability of the establishment.
In addition to understanding the legal specifications of the free zone, the establishment will also have to give details about the specific minimum capital that has to be provided by the company for it to be approved in the free zone region.
The local administration has the right to question about the establishment, its operational structure, etc since the establishment is given assistance so that it proves to be a benefit to the area. Legal specifications that need to be taken care of while setting up a firm in a free zone will be provided by a team of people who are specifically trained and experienced to handle such situations, keeping to the legal framework of the region. Research has to be done by the company that is intending to start a business since information about the state of the economy and other factors such as the point of view of the brand, about the brand etc will have to be considered so that the newly started business can stabilize its position among other companies and in the already existing economy.
Benefits of Business Setup In Free Zones
The benefits that are enjoyed while conducting a business in the free zone of a country are the following:
- Foreign company ownership 100%
- Corporate, personal income tax exemptions 100%
- Immunity from all import and export taxes
- Recruitment services will be easier
- Inexpensive workforce
- 24hours operation of free zones companies
The different free zones in the United Arab Emirates are the following:
- Sharjah Airport International Free Zone (SAIF-ZONE) – set up in 1995, has over 2900 companies from over 91 countries. This free zone is witness to variety of business ranging from IT companies, consumer Durables, Media, Light to medium manufacturing and an assortment of numerous other companies. The SAIF zone is conveniently located near the Sharjah International Airport providing perfect conditions for business operations. Some of the services that are available and provided by means of the SAIF zone are: Legal services, Traffic and licensing offices, International couriers, workshops, transactional access to 50 international banks, restaurants, post office, transportation to and from city, etc. The capital that is required in setting up a business in the free zone of sharjah is much more lesser than the amount required in any other emirate in the U.A.E.
- Abu Dhabi Airport Free Zone: Abu Dhabi, the capital of the United Arab Emirates, is also the second most populous emirates among the seven emirates. Economically,culturally and commercially Abu Dhabi has developed to a large extent becoming a cosmopolitan metropolis. The free zone in Abu Dhabi is also advantageously located near the Abu Dhabi International Airport, taking advantage of the geographical position and leading to large-scale development of the Emirate. Services such as employee services, business services, IT & telecommunication, utilities, maintenance and other services are offered with the positive support of government organizations and public authorities.
- Dubai (Jebel Ali) free zone (JAFZA): Dubai is the most populous emirate among the seven emirates and the most technologically advanced emirate with the second largest territorial size, after the capital Abu Dhabi. Abu Dhabi and Dubai are the only two emirates which have veto power over critical matters of national importance. Dubai has emerged as the business hub of the Persian Gulf Region.