Tuesday, 25 October 2011

Setting Up Business in a Free Zone

A number of free zones exist within Dubai and, as such, have a distinct
legal status within the UAE. 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 100 per cent foreign
owned and benefit from a guarantee that tax will not be applied for a
certain period of time, notwithstanding any subsequent change to
federal or local laws.
The free zones include the Jebel Ali Free Zone (the JAFZ), the Dubai
International Airport Free Zone (DAFZA), the Dubai Technology and
Media Free Zone (TECOM), the Dubai Cars & Automotive Zone, the
Dubai Health Care City, the Dubai Multi Commodities Centre and the
Gold and Diamond Park. We understand that additional free zones
will be established in the coming years.

The type of business that is to be set up dictates which free zone
should be used. For example, the DAFZA is intended for businesses
that import and export goods and the business activities permitted in
TECOM include ‘design, development, use and maintenance of
everything relevant to Information Technology, E-commerce and

The largest free zone in Dubai is JAFZ. It was established in 1985 and
was the first zone to be set up in the UAE.

Each free zone is governed by an independent Free Zone Authority
(FZA), which among other things, is responsible for issuing to
businesses the necessary operating licences for operation within the
relevant free zone.
As an illustration of the types of operating licences issued by the free
zones, the following is a description of the operating licences issued by
the JAFZ:

Trade licence: This licence is available to companies who wish to import,
export, sell, distribute or store items identified on their licence. Sales
cannot be made directly to the UAE. Any company wishing to sell goods
from the JAFZ into the UAE must appoint a distributor or agent in the

Industrial licence: Industrial licences are intended for companies
wishing to carry out manufacturing activities. Restrictions on selling
products into UAE also apply to industrial licensees and a distributor or
agent must be appointed in the UAE in order to sell products into the

Service licence: A service licence permits the licensee to provide services
within the free zone. Services provided by the free zone licensee must be
the same as those stipulated in the parent company’s licence in the UAE
or abroad.

National Industrial licence: A national industrial licence permits the
holder to import raw materials, manufacture specified products and
export the finished products. However, a minimum 51 per cent of the
shareholding must be owned by Gulf Co-operation Council (GCC)
nationals. In addition to this restriction, a minimum 40 per cent of the
value of the final product must have been added in the free zone.

From the above description of the relevant licences, it should be noted
that a licence holder cannot operate outside the free zone using its free
zone licence. A distributor or agent must be appointed within the
UAE. However, potential customers from the UAE may visit the
premises of the licence holder to view the goods

Vithul V Murali 
Al Zaeim Corporate Services 
Dubai Mobile : +971 50 55 73 538
Email  :Vithul@a2zconsultus.com
Skype : Vithul.murali

1 comment:

  1. Very Informative message from a well experienced consultant!!