Amongst the GCC, the UAE has taken the lead in developing free zones and has been remarkably successful in attracting foreign investment. In fact, nearly all new foreign investors in the UAE gravitates to the free zones.

The proliferation of free zones in the UAE witnesses the emergence of two parallels, yet distinct and divergent business environments. The onshore environment remains subject to national laws and regulations, regarding foreign ownership; whereas the free zone environment offers complete freedom of ownership to foreign investors.

As the proliferation of free zones continues, with over 28 free zones throughout the UAE, three segments within the free zone environment are also emerging. Initially, free zones were typified by proximity to a port or airport, however, over the last few years a new phenomenon has emerged which is not linked to a port or an airport but designed to appeal to specialized service industries (an “urban free zone”).

The port-based free zones are working to attract investors who will route their shipments through the respective ports. The airport free zones have a comparable target market among users of air cargo. The urban free zones, on the other hand, by allowing freedom of movement within the onshore environment, are, in effect, competing with the onshore environment.

There are already signs of a movement of established foreign companies from the onshore environment to the urban free zones.

Generally, the differences between the free zone and the onshore environments are as follows:

  • In a free zone, foreign investors can own 100% of the share capital of the company and are not obliged to have the required 51% local shareholding or local services agent. Most onshore types of setups, a national shareholder must hold 51% of the share capital.
  • In a free zone, all shipments of goods are exempt from customs duty with no time limits. In an onshore, most imports are subject to duty unless held in duty-free storage areas, which are subject to time limits.
  • In a free zone, investors are not subject to municipal taxes on rental of industrial or office space. In an onshore, rentals are subject to municipal taxes.
  • In a free zone, there is typically a centralized service which handles government relations (employment, immigration, car licensing, etc.) on behalf of investors. In onshore, investors usually have to deal directly with relevant government authorities.

In most other respects, the free zone and onshore environments in the UAE are the same. For example, there is no corporate or personal direct taxation, there are no constraints on repatriation of capital or profits, and in most cases there are no explicit controls on the pricing of goods, services, labor or materials.

We have an in-depth knowledge of the requirements of the diverse free zones in the UAE and are able to provide a broad range of services to include initial advice as to the most suitable free zone in view of the nature of the business to be carried on, and assistance in preparing business plans, applying for residence and employment visas, securing office spaces and negotiating leases, obtaining/ renewal of all corporate documents to including trade licenses and chamber of commerce certificates.

We also provide ongoing service to ensure legal compliance with all rules and regulations of the relevant free zone.

Please see our briefs on most used free zones in the UAE.

If you are looking to setup in a free zone, please fill in our ‘Free Zone Application Form’ and send back to us. One of our corporate team shall contact you shortly.

If you wish to discuss other free zone setup options, please feel free to contact us at contact@motei.com to arrange for an appointment.

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Telephone: +971 4 435 5959
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Skype: motei.office

Damac Executive Heights (TECOM)
Office No. 801, 8th Floor
P.O. Box: 112888
Dubai, UAE

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