Free zones are special economic areas ruled by distinct regulations that are exclusive to businesses operating in the areas. Within these zones, free zone companies are allowed to trade a diverse range of goods, services, and resources while benefiting from special tax incentives, foreign ownership laws, and many more advantages.
The United Arab Emirates (UAE) government has established 46 free zones across the Emirates, each designed for a specific business activity. These zones hold the potential to boost business exponentially, attracting a remarkable 200,000 foreign direct investment companies to establish their presence.
Now, let’s explore the five benefits that UAE free zones can offer you.
1. 100% foreign ownership
One of the most obvious benefits of establishing a free zone company in UAE is complete foreign ownership. Expat business owners can solely own the business setup regardless of their nationality, without requiring a local sponsor.
In contrast, businesses situated within the mainland jurisdiction must find a UAE national who holds a specific percentage of their companies, leaving the business owners with a maximum of 49% ownership. This distinction doesn’t apply to free zones, where entrepreneurs can retain 100% ownership.
2. Corporate and personal tax benefits
In a significant move, the UAE implemented its inaugural Corporate Tax Law (CTL) on June 1, 2023. This new legislation sets a main corporate tax rate of 9% for companies that earn more than AED 375,000 (approximately USD 102,000) in income. The CTL also clarifies that companies qualifying as “Qualifying Free Zone Persons” (QFZP) and meeting certain criteria will be subject to a 0% corporate tax rate. On the other hand, companies that don’t meet these criteria, known as “Unqualified Free Zone Persons” (UQFZP), including those who don’t meet the annual income requirement.
The introduction of CTL marks a significant shift in the UAE’s tax policy, yet the new rate remains notably lower than the global average of 23%. In addition to the advantage of a low corporate tax rate, the UAE also distinguishes itself by not imposing personal income tax, inheritance tax, estate tax, or gift tax on individuals, further enhancing its attractiveness as a tax-efficient destination.
3. Import And Export Duty Exemption
The UAE free zones are exempt from import and export duties. Companies operating within the UAE free zones can import raw materials, components, and finished goods without incurring the usual customs duties. Similarly, companies can export goods manufactured or processed within the free zone without encountering export duties.
By eliminating import and export duties, the UAE free zones encourage businesses to engage in diverse trade activities, foster economic growth, and attract foreign investment. This incentive also supports businesses in saving costs, maintaining competitive pricing in the global market, and enhancing their overall competitiveness and profitability.
4. No currency restrictions.
The procedure of conducting business for entrepreneurs is made simpler by the elimination of any form of currency limitations in UAE free zones. Unlike certain regions that might limit the use of different currencies for business transactions, companies in UAE free zones have the freedom to engage in cross-border activities using various currencies.
This feature holds particular significance for businesses involved in international trade. It enables businesses to seamlessly interact with international partners, clients, and suppliers, eliminating concerns about currency conversion limitations and intricate regulatory procedures.
5. Easy company setup
Most UAE free zones have a one-stop-shop facility that provides all the necessary services to set up a company, such as company registration, licensing, visas, and permits. Therefore, setting up a company in the UAE free zone is straightforward and efficient compared to setting up a company outside the free zone.
However, it’s worth noting that regulations can vary between different free zones. Some free zones have more relaxed regulations, while others have specific requirements for certain industries. Therefore, it’s essential for businesses to evaluate legal and licensing requirements, and to ensure these regulations match with business activities and long-term objectives.