Dubai Free Zones By Web Editor Jul 28, 2004, 06:10

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The Jebel Ali Free Zone and Dubai Airport Free Zone have been set up with the specific purpose of facilitating investment. Accordingly, the procedures for investing in the zones are relatively simple.

While the free zones are designed to complement and contribute to Dubai's growth and development, their legal status is quite distinct. Companies operating there are treated as being offshore, or outside the UAE for legal purposes.

The option of setting up in the free zones is therefore most suitable for companies intending to use Dubai as a regional manufacturing or distribution base and where most or all of their turnover is going to be outside the UAE.

Free Zone Incentives

1. 100% foreign ownership;

2. Exemption from all import duties;

3. 100% repatriation of capital and profits;

4. Freedom from corporate taxation, as applied throughout Dubai, with the added bonus of a renewable 15 year guarantee in the free zone;

5. Abundant inexpensive energy;

6. Simple and efficient recruitment procedures ensuring the availability of a competitive skilled and experienced workforce;

7. A high level of administrative support from the free zone authorities.

Licenses

Companies approved for operation in Jebel Ali Free Zone or Dubai Airport Free Zone, are granted one of the following types of licences: Trading; Industrial; Service; or National Industrial. These licences are renewable annually for as long as the company holds a valid lease from either of the Free Zones.

1. Trading licences will be granted to companies holding a valid licence issued by the Dubai Economic Development Department or an equivalent authority in the UAE, and to companies incorporated outside the UAE. In each case, the permitted activities on the Free Zone licence must conform to those on the existing licence. Trading licences are also issued to Free Zone Establishments (FZE).

2. Industrial licences are issued to companies incorporated outside the UAE and to Free Zone Establishments.

3. Service licences are only granted to companies holding a valid UAE licence.

4. National Industrial licences are issued to industrial companies registered within or outside the UAE, provided they meet the conditions of having at least 51% AGCC equity and their local production accounting for at least 40% value added. Such companies must obtain provisional approval from the UAE Ministry of Finance and Industry. A National Industrial licence grants its holder the same rights as those of national and other AGCC companies, and products exported to AGCC states will be exempted from custom duties.

If a company wishes to practise more than one of the above mentioned activities, it must obtain a separate licence for each category of activity.

Companies holding a Free Zone licence are permitted to operate in the Jebel Ali or Dubai Airport Free Zones and outside the UAE. Operation within the UAE can be undertaken either by a commercial agent, representative, distributor, or the mother company licensed by the relevant UAE authority. Any company holding a Free Zone licence can itself purchase goods or services within the UAE.

Setting Up a Branch of a Foreign Company

Any company wishing to set up a project in the Free Zones must first complete a simple questionnaire. From the information provided, the Jebel Ali Free Zone Authority or Department of Civil Aviation can make a first assessment of whether the company's needs can be met.

After consideration of this questionnaire, the company will be provided with:

1. a licence application including an appendix with details of the documents required concerning the company's legal status;

2. a proforma of information required for planning; and

3. a consumer request for electricity supply.

On receipt of these documents, the Free Zone authorities will consider the proposal. If provisional approval is given, the company will be asked to prepare and submit the documents called for in the appendix to the licence application.

After the checking of these documents, a meeting will be called to discuss and finalise the project details. If everything is satisfactory, the Free Zone authorities will issue conditional approval for the project. Thereafter, a lease agreement and, if required, a personnel secondment agreement will be prepared by the Free Zone authorities for signature by the company.

At the time of signing, the applicant will be required to provide the insurance policies called for in the agreements and should pay the agreed rental and licence fees prior to collection of the licence.

If the company wishes the Free Zone authorities to sponsor employees on its behalf, applications for entry permits may be submitted once the licence has been issued. The bank guarantee called for in the personnel secondment agreement will be required at this stage together with visa charges.

If the company's project involves the erection of a structure, detailed plans must be submitted after the lease has been signed. When theplans have been agreed, a building permit will be issued.
Administrative work, such as importing equipment or engaging labour for installation of equipment, may proceed in parallel with construction work. But application for entry permits for operatives to be sponsored by the Free Zone authorities will not normally be accepted until a completion certificate for the construction has been issued.

Setting Up a Free Zone Establishment in Dubai

A Free Zone Establishment - or FZE - is an establishment formed and registered within the Free Zones and regulated solely by the Free Zone authorities.

Such establishments must have a capital of at least Dh.1 million and liability will be limited to the amount of paid-up capital. A FZE need only have a single shareholder and is an independent legal entity.

Any company, organisation or individual wishing to form a Dubai Free Zone Establishment must submit a completed application to the Free Zone authorities. A decision on whether permission has been granted will be given within 30 days of receipt of the application and any other information and documentation required.

If permission is granted, the authorities will record all relevant details in the FZE Register and issue a Certificate of Formation. This will specify the date of registration after which the FZE will be free to conduct any such business as is permitted in its licence.