Businesses wishing to operate in Dubai should be aware that several zones, known as ‘free zones’, have been established to ease foreign investment in Dubai. However, businesses operating within a free zone are restricted over the types of dealings they may conduct outside the designated free zones. Businesses wishing to conduct business in the mainland UAE must comply with the requirements of the Companies Law and other relevant laws applicable to the respective industry. Below is an overview of the most popular methods used by foreign companies to operate in Dubai within a free zone.
Companies incorporated and operating within the free zones are not subject to many of the restrictions imposed by the Companies Law and other UAE laws and regulations. Entities operating within the free zone may be wholly owned by foreigners, who benefit from a guarantee that tax will not be applied for a certain period, notwithstanding any subsequent change to federal or local laws.
There are around 30 free zones in Dubai including the Dubai International Financial Centre (DIFC), the Jebel Ali Free Zone (JAFZ), the Dubai Airport Free Zone (DAFZ), the Dubai Technology and Media Free Zone (TECOM), the Dubai Health Care City, the Dubai Multi Commodities Centre and the Gold and Diamond Park etc…
The commercial activity that will be carried out normally dictates which free zone should be used. For example, the DAFZ is intended for businesses that import and export goods and the business activities permitted in the TECOM include ‘design, development, use and maintenance of everything related to information technology, e-commerce and media’.
The JAFZ is the largest and oldest free zone in Dubai; it was established in 1985.
Each free zone is governed by an independent free zone authority (FZA), which, among other things, is responsible for drafting and implementing the zone’s regulations, policies and strategies and for issuing the necessary operating licenses for operation within the zone.
The Free Trade Zones have been set up with the specific purpose of facilitating investment. The procedures for investing in the free zones are relatively simple.
The companies operating in the Free Zones are treated as being offshore or outside the UAE for legal purposes.
The free zones are suitable for companies intending to use UAE as a regional manufacturing or distribution base, with the bulk of their business outside the UAE.
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