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3.1 What Is A Free Zone?

What is a Free Zone?

What is a Free Zone?A free zone, also known as a free trade zone, is a defined geographical area within each emirate. A free zone may also exist as the result of a mutual agreement between several countries to create a customs-free zone in a designated area. The fact that no duties or taxes are levied in the free zone helps to promote trade, especially the import and export of all kinds of goods.

If multiple countries conclude an agreement to create a joint free zone, all barriers to trade are abolished. No duties or taxes are levied within the free zone. This freedom from barriers attracts companies from all sectors and encourages them to relocate to the free zone and to register new companies. A free zone optimises the movement of goods between the individual countries in the zone and offers the opportunity to either secure or disallow imports from third party countries.

The most important types of free trade zones are free zones, free port zones and export processing zones. The United Arab Emirates offers a number of highly popular free trade zones, particularly the emirates of Ras Al Khaimah and Ajman. Further information can be found under the relevant menu items on the left-hand side.

What is a Free Zone?A free trade zone is a geographical area within a country and can be designated or located anywhere within a country. Large manufacturing and trading companies are afforded the opportunity to relocate their entire production line to these free zones, thereby guaranteeing considerable savings on the transport and export of goods to other countries. Equally, a company could move their production facilities to another country and import the resulting goods to the free zone without paying customs duties or tax. This means, for example, that a company can have their goods produced in China, import them tax-free into the free zone and then export them tax-free out again. Within this scenario, the company’s profits remain in the free zone country and are tax exempt. Typical business activities in free zones include the handling and storage of goods in warehouses (often rented out by the free zone), the packaging and sorting of individual products into smaller quantities or individual packages and the inspection of distribution and freight centres.

A free port zone is a free trade zone that is connected to a sea or airport. A free port zone is created in order to unburden companies from government restrictions and allow the free flow of goods. Free ports allow the tax-free import and export of goods and guarantee tax exemption. These immense advantages incentivise companies to use free port zones from a financial, tax, investment and regulatory viewpoint. Trade barriers, regulations on bank transactions and official requirements for employees are also relaxed within the borders of the free port. Recently, some free ports have adopted multimodal cargo handling as a new service option.

What is a Free Zone?

An export processing zone (EPZ) is defined as an area in which special incentives and privileges are offered to foreign firms for producing goods for export. EPZs are typically industrial areas in developing countries that offer favourable customs regulations (e.g. on the import of manufacturing equipment) as a financial incentive for export-oriented manufacturing companies.

What is a Free Zone? Free zones connect the region with the global economy through the production of goods intended for export, foreign currencies and the possibility for companies outside of the free zone to trade with international firms.

The most successful and internationally popular free trade zones are located in the United Arab Emirates (UAE):

  • Ras Al Khaimah Free Trade Zone RAK (approx. 80 km from Dubai);
  • Ajman Free Trade Zone (approx.40 km from Dubai);
  • Dubai (location with the most stringent requirements and highest formation costs).

Hong Kong is also considered a special region for “free trade”.

   Ras al Khaimah

Ras Al Khaimah

Special advantages:
As a shareholder, you may apply for an “investor visa”, which gives you the opportunity to reside freely in the U.A.E. Companies may be eligible for several investor visas. Free zone companies are recognised internationally without restrictions and benefit tax exemption.

   Dubai South

Dubai South

Special advantages:
Like those in Ras al Khamai and Ajman, companies based in the Dubai South free zone enjoy many tax benefits. Shareholders of these companies may also be eligible for investor visas, allowing them to reside freely in the U.A.E. Dubai South is also an internationally recognised free zone.

   Ajman

Ajman

Special advantages:
Companies based in the Ajman Free Zone enjoy international recognition and tax exemption. The Ajman Free Zone offers a complete package for company formation including one year’s rental of company premises. Multiple investor visas may be applied for.

   Other Free Zones

Other Free Zones

A Range of Possibilities!
The range of free zones where you can set up your company is by no means limited to the three listed here. Depending on the goods your company produces or the services you offer, there may be a free zone specifically suited to your company. Whether you are in the media business or the healthcare industry, we can help you set up your company in the free zone that is right for you.

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