UAE offers special incentives for those who want to open up businesses there. There are more than 35 free zones for potential investors and would-be entrepreneurs spread across Dubai, Abu Dhabi, Sharjah, Ras Al Khaima, Fujaira, Ajman, Um Al Quwain, etc. So, what are free zones and are they actually useful when it comes to gaining strategic business advantage.
What are Free Zones?
These free zones are spread across UAE’s mainland airports and seaports. Free zones are a planning tool for boosting the economic development of the region. Typically, a free zone is meant for certain categories of industry, and licenses are given only to those categories of firms for operating from those free zones. For instance, the SEEPZ in Mumbai is famous for hosting the jewellery businesses (to support India’s diamond trade from Mumbai/Gujarat) and software. The government of a country plans its free zones carefully, and offers attractive SOPs to would-be entrepreneurs and those thinking of opening up their business there.
UAE is most active in promoting their free zones, cutting down on red-tape to ensure investors think of ‘them’ first when they think of opening a branch or setting up a business.
How do they help Businesses in General?
Typically, free zones are exempt from import and export taxes; there are no long-term corporate taxes; exemption from personal income tax; possibility of ploughing back the entire profits and capital to the country of origin; 100 percent secrecy assured; ease of liquidity at will; foreign ownership of the company and holding properties is possible in free zones, existence of good support services such as help with recruitment, housing facilities, etc. The most successful of these free zones include the Dubai Duty Free Airport, Dubai’s media and internet cities, Morocco’s Tangier which is also using free zones to establish its reputation as a ‘new business hub.’
Do the free zones actually help?
There is a major limitation in the modus operandi of the free zones. A free zone company can’t engage directly with the UAE market. They have to work through a local business agent or appointed distributors. Also, the standard custom duty of 5 percent is applicable for the local business.
On balance, it seems the benefits associated with the free zones far outweigh the disadvantages. So, think hard and make that informed choice of setting up business in the UAE. The next Dubai business success story could well be your story!