Free Trade Zones (FTZs) of UAE – Here’s 5 Reasons Why?

The UAE is a federation of seven emirates (Abu Dhabi, Ajman, Dubai, Fujairah, Ras Al Khaimah, Sharjah and Umm Al Quwain) strategically located between Europe, Africa and Asia. The UAE ranks #16 in the World Banks Ease of Doing Business 2020 rankings and in conjunction with investor friendly legislation, a strong financial and banking system, well developed infrastructure and an abundance of human resources, makes the UAE one of the top destinations in the world for foreign investment.

There are 45 FTZs throughout the UAE, with the majority located in Dubai. The FTZs offer a wealth of benefits to foreign investors and have been incremental in boosting the growth of the UAE economy. Each FTZ is independent, with its own set of rules and regulations. However, they are subject to certain UAE federal laws.

There are many advantages for foreign investors to consider the FTZs for setting up a base in the UAE.  The following are a few for you to consider:

 

  1. 100% Foreign Ownership

Setting up a company outside of the FTZs in the UAE requires domestic partnership. In most cases, the UAE-based partner must hold a minimum of 51% ownership. However, setting up a company within the FTZs does not require any domestic partnership and 100% foreign ownership is permitted.

 

  1. Ease of Setting Up

The setting up process is simple and cost effective. A company can be set up online from nearly 120 countries globally. Dubai has implemented the “One Free Zone Passport” initiative which allows companies to operate across 24 FTZs in Dubai with one license. Companies in FTZs are allowed to do business only within the FTZs or outside of the country. However, by opening up branch offices within the UAE, one can do business outside of the FTZs.

 

  1. Major Tax Advantages

Most FTZs offer a guaranteed tax holiday (0% corporate income tax or income tax exemption) to their residents.

The UAE implemented VAT from 1 January 2018 and the standard VAT rate in the UAE is 5%, with a zero rate for exports. All goods and services obtained in the course of conducting business in the UAE are taxable, unless specifically exempted or out of scope according to the UAE VAT Decree Law.

 

 

  1. 100% Repatriation of Capital and Profits

A business operating in the FTZ benefits from the right to repatriate 100% of capital and profits. There are currently no withholding taxes in the UAE and there are no transfer pricing regulations. For companies with a global presence, this advantage can be seen to be very beneficial.

 

  1. Simplified, Cheap and Fast Immigration Process

As a business owner in the UAE, one gets their own employment visa, with it being quick and easy to get further residence visas for family members and employees. Visas are normally valid for one to three years. The visa process is straightforward, made up of four stages – entry permit, status adjustment, a medical fitness test, then Emirates ID registration and visa stamping.

 

If you are looking to establishing a business in a FTZ or the UAE, we at D’ Andrea and Partners Legal Counsel, have a team of experts to advise you. Do get in touch at info@dandreapartners.com for any questions or assistance.