Within the UAE, there are at present more than 28 different Free Zones with a distinct legal status. As a result, companies settled in a Free Zone are not only exempt from taxes but also from the general compulsions applicable under UAE Company Law. This means that there is no requirement to take a UAE partner as 51% shareholder of the business in the free zone set up. A Foreign Investor may own the company 100% either solely by himself or through the agreed shareholders regardless of their nationality. Branch offices in Free Zones are also not required to appoint a local service agent as prescribed by UAE Company Law.
However, Companies operating within the Free Zones are treated as being foreign companies for trade purposes within the UAE. Consequently they are not allowed to carry out trade within the UAE without a local distribution agent and have to pay customs if exporting goods into the UAE. The customs will be levied when the goods pass the gate of the Free Zone premises. However, a law waiving the customs duty for Freezne companies is expected soon.
The option of setting up in the Free Zone area is therefore most suitable for companies intending to use the Emirates as a regional manufacturing or distribution base, where the best part of, or their turnover or the business in it's entirety, occurs outside the UAE.
The legal requirements and regulatory framework as well as the special benefits to a particular line of business differs from Free Zone to Free Zone, thereby creating a particular interest in one Free Zone as a better option than another for different business purposes.
It is important, therefore, to obtain accurate legal advice before making a decision about which Free Zone would best suit the purposes of the intended business. At Fichte & Co we have vast experience in setting up companies in many different Free Zones. Our entrenched relationships with most of the UAE based free zone authorities and knowledge of the processes involved in the licensing and registration of new corporate entities enable us to offer our clients advice and assistance when making the decision and application to the chosen Free Zone.
Objectives of free trade zones
• To promote non-polluting manufacturing activities of any size and in any industry.
• To allow companies to be in the vicinity of the markets in the Middle East region and other global regions.
• To have companies establish a regional trading and distribution base in the UAE.
There are different types of Free Zones in the UAE and they cater for the different needs of each type of company.