UAE free zones are a major attraction to foreign investors and businesses wishing to conduct business in the UAE. But what exactly are they and what benefits do they offer? Associate Director, Leevyn Isabel explores...
Until the introduction of the Foreign Direct Investment Law in late 2018, it was a federal requirement for at least 51% of the shares of a company to be held by a UAE national. As a result, free zones were established in order to attract foreign businesses to the region wishing to have full control of their business.
What is a free zone?
Free zones are geographically demarcated areas within the UAE (even if most of them are not fenced or gated) permitting 100% foreign ownership and are in most cases, dedicated to a specific industry. They were designed to support strategic transformation in key industries (e.g. finance) and many are built with public finance and boast state-of-the-art facilities.
For instance, the Dubai Media City - a free zone in the emirate of Dubai - has infrastructure and licences adapted to the needs of the media industry. Similarly, the Dubai International Financial Centre (DIFC - see below) attracts companies in the financial services sector, drawing in insurance, financial services and investment firms and banks wanting to grow their international client-base.
Accordingly, each free zone has its own specific requirements regarding minimum capital requirements, office or warehouse space and permitted activities; with each possessing the relevant licences and adequate legislation to enable their dedicated industry to flourish.
Benefits of free zones
With more than 50 different free zones across the UAE and with many more under development, free zones have helped make the UAE an attractive option for foreign businesses looking to relocate or expand their global footprint. The common benefits of doing business in a UAE free zone include:
- 100% foreign ownership of the enterprise
- Access to world class logistic facilities
- Availability of a large pool of multicultural, skilled professionals
- Benefits from economies of concentration (given the zones dedicated to industries)
- Ease of recruiting international employees, with all free zones providing one-stop-shop services for work visas
- Tax holidays - usually guaranteed for 15 or 50 years
- 100% import and export tax exemption
- 100% repatriation of capital and profits
- Corporate tax exemptions for up to 50 years
- Eligibility to apply for the UAE Tax Residency Certificate
Dubai International Financial Centre ("DIFC")
The Dubai International Financial Centre is recognised as the leading financial centre in the Middle East, Africa and South Asia region. The DIFC free zone is distinct from other free zones in the UAE as it has its own court with independent regulations abiding by an English Common Law framework.
The main features of the DIFC, in addition to the ones stated above are:
- Access to laws and courts (including arbitration system) based on English Common Law;
- Access to DIFC Will and Probate Registry;
- Access to a recognised and international stock exchange with primary and secondary listings of debt and equity instruments;
- Choice of a large number of regulated, non-regulated and financial activities licences;
- A platform to access regional wealth and investment opportunities.
With over 65 significant funds domiciled in the DIFC and well over 2000 companies resident within its regulatory parameters, the DIFC provides a flexible and hospitable business ecosystem for financial firms wishing to expand their global footprint.
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