Free Trade Zones are specially designated areas within the United Arab Emirates (UAE) where goods can be traded, stored, and generally processed without the strict application of standard customs regulations. These zones are often strategically located to facilitate international trade, such as at major seaports, international airports, and key national borders. The "Mainland" refers to areas outside these special Free Trade Zones, subject to the UAE's regular national business and trade legislation. This means that businesses in mainland areas must follow different rules and conditions than those in Free Trade Zones.
In this blog post, we compare the advantages and disadvantages of the two main location options in the UAE: Free Trade Zones and the Mainland.
Advantages of Free Trade Zones:
- Full Foreign Ownership: Investors can own 100% of the company without the need for an Emirati majority shareholder.
- Customs Exemptions: In some Free Trade Zones, there are no import or export duties, making international trade more lucrative.
- Industry-Specific Infrastructure: Locations like Dubai Internet City are tailored to meet the needs of specific industries, offering state-of-the-art infrastructure. JAFZA, for example, is attractive to industrial companies due to its large warehouses.
- Potential Tax Exemptions: Under certain scenarios, companies may be exempt from the new corporate tax.
However, companies in Free Trade Zones are restricted to trading within the zone or internationally and cannot directly offer their products or services on the Mainland. Additionally, office spaces must be located within the respective zone.
Advantages of the Mainland:
- Unlimited Business Activities: Companies can operate freely throughout the UAE (including Free Trade Zones) and internationally.
- Direct Market Access: There are no restrictions on direct access to local markets, and intermediaries are not required.
- Flexible Office Locations: Companies are not limited to specific zones and can choose their location freely.
However, certain sectors on the Mainland may require an Emirati partner, and regulations are generally stricter than in Free Trade Zones. Additionally, there is no option for exemption from the new corporate tax.
Conclusion:
The decision between establishing a business in a Free Trade Zone or on the Mainland heavily depends on specific business requirements and goals. While Free Trade Zones are particularly attractive for companies focusing on international trade and looking to benefit from tax advantages, the Mainland offers greater flexibility and direct access to local markets. It is advisable to utilize the expertise of experienced tax consultants to develop an optimal business structure in the UAE.
