A comprehensive overview of free trade zones in Dubai
Dubai is known to be one of the most open economies in the world and one of the best places to start a business. By utilization of world-class logistics hubs, advanced infrastructures and free trade zones in Dubai turn into a commercial hub for a short time in the Middle East and beyond. The city’s economy is growing and there are more opportunities for a profitable investment. Therefore, the discussion of investment options in Dubai free zones, which have always been an important issue for international activities, is raised.
This article presents a definition of free zones first, then information about free zones in Dubai, free zone companies, legal framework, and regulations are reviewed. And finally, the advantages and disadvantages of the free zones are sifted through.
Definition of free zones
Free trade zones are business zones located around international airports, ports, and borderlands where companies are offered numerous benefits such as discounts in paying taxes and various customs payment terms. Companies established in Dubai free zone areas are allowed to have full ownership of their business and this ownership encourages foreign entrepreneurs to achieve their smart goals. Dubai free zone was such a role model to introduce the impact of free zone development in the UAE global market.
Free zones in Dubai
Free trade zone companies take advantage of benefits such as import and export tax exemption, and appropriate customs duty rates. Full foreign ownership without revealing the details of the company to the public has made them very popular among entrepreneurs and investors. Free zones cover a wide range of industries and various corporate activities can be carried out. For example, technology, infrastructure, education, and retail are among the fields that investors can consider for establishing a company.
Free trade zones are explored as special economic zones to provide tax authorization and customs duty advantages for expat investment. Free trade zones in Dubai are controlled according to a set of precise regulations and laws and they provide trading and industrial services for investing in a new business. The Authority of free zones provide business certificates for expat investors, and Each of them is arranged around one or more specific industry categories to provide licenses to companies related to those categories. For example, the management and operation of the Jebel Ali Free Zone as one of the largest free zones in Dubai is the responsibility of the Jebel Ali Free Zone Authority.
To attract investors and create a suitable environment for generating economic growth the Dubai Free Zones Council try to efficiently manage the development of Dubai free zones and promote coordination between them. These efforts have made a great contribution to Dubai’s future plans to become the best global investment destination.
List of Dubai free zones
more than 30 free zones have been set up in Dubai which includes the following:
1. Dubai Creative Clusters Authority (DCCA)
The DCCA responsibility is the development of regulations and making decisions for creative Dubai industries so that creative companies are attracted and remained in the city. DCCA is the main administrative body observing a number of recognized free zone parks in Dubai. Managing the process of application and licensing for establishing a company in a specific industrial category, this institution enacts and implements the regulations within the state of its own jurisdiction.
The free zone areas under the DCCA consist of:
- Dubai Internet City
- Dubai Media City
- Dubai Production City
- Dubai Studio City
- Dubai Outsource City
- Dubai Knowledge Park
- Dubai International Academic City
- Dubai Science Park
- Dubai Design District
Among the most important advantages of forming a DCCA company are no taxes, 100% foreign ownership, strategic location, easy business processes, and advanced infrastructure.
2. Dubai Multi Commodities Centre Authority (DMCC)
the responsibility DMCC is the registering and licensing companies that are ready to set up their businesses and it can be one of the greatest global market places for a broad variety of segments and industries. DMCC is the world's most connected free zone and an important hub for commodity trade. DMCC provides everything a community needs to develop.
DMCC is very experienced in facilitating commodities trade, which is an essential capability for global trade. The central plaza district's main platform is larger than New York Times Square, and it is connected to a retail mall by world-class shopping centers. The free zones area in Dubai under DMCC consists of:
• Jumeirah Lakes Towers
DMCC has the main advantages to become a key free zone for foreign investors in Dubai. With Re-domiciliation, DMCC has adopted the laws and process for transferring and maintaining all the records of other jurisdictions' companies.
The main reasons to Re-domiciliation are to have the advantages of helpful taxation, lower level laws, transferring to an international financial hub, and capital markets accessibility.
Other Free Trade Zones in Dubai
These Dubai free trade zones deal with a broad range of industries from the metal industry to Biotechnology and production:
- Jebel Ali Free Zone Authority
- Dubai Airport Free Zone Authority
- Dubai Silicon Oasis Authority
- Dubai Healthcare City Authority
- International Humanitarian City
- Dubai World Trade Centre
- Dubai Maritime City Authority
- Gold and Diamond Park
- Dubai South
- Dubai Outsource City
- Dubai International Financial Centre
- National Industries Park
- Dubai CommerCity
In the following, we will describe some of the most important free zones in the above list:
- Dubai CommerCity (DCC)
Providing a dynamic e-commerce ecosystem for local and international brands to help them to start a new businesses and set up their e-commerce company is the main responsibility of DCC as the first e-commerce free zone. DCC free zone catering to the e-commerce trade as a prime e-commerce center in the Middle East and South Asia is divided into three main sectors: The business, social, and logistics sectors.
Dubai CommerCity is the first ever e-commerce free zone that offers a flourishing e-commerce ecosystem to various brands regionally and globally to help them establish and operate their e-commerce business in South Asia and the Middle East region.
- Dubai Maritime City
In the past few years, with the expansion of its maritime connections, Dubai has been ranked as an international maritime hub, promoting its position among the top seaports globally. Dubai Maritime City operations, with full support for logistics activities, reduce operating costs, provide a suitable environment for entrepreneurs, and with the aim of increasing investment in the maritime industry and helping the development of an advanced maritime business community, offer the best services to business owners on intelligent platforms.
- Dubai International Financial Centre (DIFC)
DIFC is a main financial center in the region consisting of 72 countries with a GDP of US$7.7 trillion. DIFC has over 15 years’ history of trade and investment services, and it connects emerging markets with across the world. DIFC is the financial hub with efficient company regulations in the region. The particular point here is that DIFC is governed by its own court with independent regulations that follow the framework of common law.
- Jabel Ali Free Zone Authority (JAFZA)
JAFZA, hosting 1000 of manufacturing and trading companies across the world and provides about 24% of the total foreign direct investment flow to Dubai. JAFZA allows companies to reduce their operating costs with modern facilities, and the best commercial infrastructures. JAFZA as a business hub is located in the west south of Dubai, near Abu Dhabi, between Dubai International Airport and one of the largest seaport centers in the world. JAFZA has adopted processes and laws to provide the transferring condition for companies from another jurisdiction. For those who are looking to set up a business in Dubai, the top JAFZA features can be technical warehousing infrastructure, the full return of capital, and no restrictions for currency and taxation.
- The Dubai Healthcare City (DHCC)
utilization of healthcare services by individuals and companies is much easier with the help of DHCC City as an important urban healthcare center. DHCC is a 90-nation network of 160 hospitals, ambulatory surgery centers, and diagnostic laboratories serving nearly 200 retail centers in the free zone on behalf of their supporting partners.
Currently, around 21,000 businesses consisting of multinational companies and creative start-ups in free zones make up a big part of Dubai's commerce. Every month, approximately 170 new companies join DMCC and take advantage of modern facilities and infrastructures, 95% of which are newcomers to Dubai.
The Advantages of free zones in Dubai
Free Zones provide a wide range of services for various industries and generally make the procedures for starting a new business easier as described earlier. However, many investors still avoid setting up their businesses in free zones. Making the right choices about starting a new business in Dubai Free Zones requires understanding the pros and cons of this action. In the following, we will examine these advantages and disadvantages in detail.
Setting up free zone companies in Dubai has many advantages. One of the most prominent advantages of starting a business is foreign ownership of the company without the need for a local sponsor and total ownership without considering the owner's nationality.
exemption in taxation is another advantage for free zone companies. They also can benefit from modern infrastructure, world-class trade processes, and governmental support and be enabled to access international trade operations by opening a bank account by their name and holding real assets.
Without opening a physical spot resulting in a faster start, company owners enjoy various tax benefits, including import and export taxes. Earning a 100% return on investment and a huge amount of profit are among other advantages. Companies in free zones by returning 100% of income and profits to the country are free to transfer funds, also the possibility of long-term leases is considered as a suitable option in free zones.
In general, free zones provide many services in the field of international trade. It is also worth mentioning that attaining residency in the United Arab Emirates is easily possible with Free Zone companies.
The disadvantages of Dubai free zones
As mentioned earlier, free zone companies have been set up to promote foreign direct investment, but it is necessary to investigate some of the challenges faced by the owners of free zone companies in foreign investment. Although it costs less to set up, it also depends on the location of the free zone. Dubai Airport free zone or Jebel Ali free zone is actually significantly more expensive than a free zone in Ras Al Khaimah.
Furthermore, to establish a company in free zones, you should seek help from a trade agent or onshore distributor for trading with companies outside your free zones. In addition, you should do specialized research to choose the free zone that best suits your needs and business situations and has regulations that are more compatible with your business.
Among the other weaknesses in setting up a company in the Dubai Free Zone, we can mention the limitation of the company's activity in a specific free zone based on its jurisdiction and regulations, which is a big obstacle in entering other markets in the United Arab Emirates. Although the increase in the number of free zones is gradually solving this problem.
By setting up a company in the free zone, foreign investors can keep the company's full shares, but in this case, they will be denied full access to the UAE market. In addition, in this case, you will not incur the costs of onshore options. However, if investors want to enjoy full ownership and still have a presence in the entire UAE market, establishing a foreign branch or a subsidiary that is fully owned by the corporate is another option.
After carefully examining all the features, there are many reasons to establish a company and start investing in free zones. But establishing a company and starting a new business requires enough time and extensive specialized research.
In this paper, we first present a definition of free zones, second, we provide a list of Dubai free zones, then we discussed free zone companies, their legal framework, and regulations. And in the last section, we reviewed the advantages and disadvantages of the free trade zones in Dubai.