Free zones provide a great service for those foreign investors seeking a passage to Middle East and Africa. Free zones provide many advantages, such as full ownership of foreign company, tax exemption, allowance of resident visa to company owners and workers, as well as inexpensive energy and labor.
Abu Dhabi free zones are a haven for foreign businesses that want to set up a regional manufacturing or distribution center, while conducting the larger part of their business outside Abu Dhabi. Usually it is utilized by import and export businesses who want to only need an office in Abu Dhabi.
Free zone companies are not subjected to tax. They can be formed by foreign entrepreneurs and investors for the purpose of access to consumer markets in the Middle East and Africa. Also, free zone companies do not have to pay corporate tax, an advantage that results in minimal withholding tax on remittance to other countries. Hence, there is no need to pay custom duties on import / export goods from the free zone.
There is also no need for appointing a UAE national shareholder to form a free zone company. Although a low rent office must be rented, staff employment will not be required.
Other advantages offered by a free zone company include the following:
- Less administrative requirements for company formation
- Lesser constraints for staff hiring
- Zero import / export tax reductions
- Superb infrastructure
- Moderate costs for energy and utilities
A free zone company can only conduct business within the Free Zone and only with international customers. Failure to oblige to this law will result in fines ranging up to US$35,000
Paid up share capital varies between US$14 to US$300,000 with the criteria being:
- The particular free zone
- Organizational structure
After company formation, the share capital can be utilized for funding the daily operations of the business.
Annual renewal of licenses are required and can be obtained by submitting annual audited financial statements to the authorities, as well as complying with other free zone laws.
A Free Zone company can engage in business activities within the vicinity of Abu Dhabi and UAE, provided that:
- An Emirati national be appointed as 51% local partner and that the trading license is allotted by the Department of Economic Development
- A service agent is hired to sell and distribute its products within the city by the company, and in its name
- There should be a branch office in the city and that a UAE agent is used for the purpose of distributing goods
- An amount of 5% will be charged as custom duty on free zone sales within the UAE vicinity
Types of Free Zone Business Entities
Foreign business owners and entrepreneurs have the choice of incorporating the various forms of Abu Dhabi Free Zone company types in the UAE free zone:
- Free Zone Company (FZC) – An FZC can be formed with at least two shareholders up to a maximum of five, as well as an appointment of two directors.
- Free Zone Establishment (FZE) – An FZE can be incorporated with a single shareholder and director. Same as a one-person company (OPC)
- Foreign Company Branch – transfers unlimited liability to the parent company
A corporate director will have to be hired for all three company types and applications for immigration visas will be required for all foreign employees.
All three types of Abu Dhabi free zone companies are required to:
- Rent office in the registered free zone
- Appoint a company secretary who is a resident of Abu Dhabi
- Renew annual of licenses by submitting annual audited financial statements to the authorities
Please note that a branch, in addition to the requirements above, has to maintain a security deposit with the government of Abu Dhabi until the time of its discontinuation.
Free zones provide superb infrastructure and a modern business environment with warehousing, onsite immigration and customs clearing department. The finest office facilities are available with interior designing including well equipped and semi-enclosed workplaces, fast internet, dedicated phone number, excellent parking spaces, as well as residence visas and work permits.
Trade activities include:
- Raw materials import
- Processing, assembling, packaging
- Finished goods export
Obtaining a service license will enable the investor to conduct those services as stated in the free zone license. Examples of consulting services include finance, industrial advancement, investment, labor relations, legal matters, management and marketing.
Examples of other services could be accounting and auditing services, food outlets, catering service providers, travel agencies, leisure and social events, insurance, cargo and freight forwarding.