Table
of Contents
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TopicS
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Free
Trade Zone - An Introduction
|
|
Benefits
of Free Trade Zones
|
|
UAE And
Free Trade Zones
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|
Jabel Ali
Free Zone – A Pioneer
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List of
Free Zones in UAE
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|
UAE Free
Zones & VAT
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Free Trade
Zone - An Introduction
A Free trade Zones (FTZ) also known
as Free Economic Zones (FEZ), Free Economic territories (FEts) or Free Zones
(FZ) are one or more areas of the Country where tariffs & quotas are
eliminated, and bureaucratic requirements are lowered in order to attract companies
by floating the incentives for doing business there.
Free trade Zones are proved to be
an effective & useful tool to develop new markets and to increase earnings
from foreign trade.
Most of the Free trade zones are
located in developing countries. They are special zones where typical trade
barriers such as import or export tariffs do not apply, bureaucracy is
typically minimized by outsourcing it to FTZ operators. Companies can seek
sheltered area best suited to their needs
The organizations set up in the Free
Trade Zones may be given tax breaks as an additional incentive. Mostly these
zones are set up in the underdeveloped part of the country, the rationale that
the zones will attract employers and thus economic activities will take place
in that area thereby increasing employment and cashflow.
Free trade zones in Latin America
dates back to the early decade of the 20th century. The first free
trade regulations were enacted in 1920 in Argentina and Uruguay. Rapid
development was done in the 1960s & ’70s.
The biggest advantage for private
companies to invest in Free Zones (also known as business havens) is
liberalized rights of establishment and access to competitive infrastructure,
transport and logistics facilities and services, according to an OECD report.
Benefits of free trade zones
In
general, Free Zones offer some or all of the below
v
Enhance
Global market presence in the country
v
Enhance
foreign Exchange Earnings
v
Enhance
employment
v
Develop
export-oriented industries
v
Attract
foreign capital in country
v
Overall
ease of doing business
v
Zero
or reduced Corporate & Personal taxes
v
No
Customs Duty
v
No
transaction tax (e.g. VAT/GST/Excise)
UAE And Free Trade Zones
Free economic zones in the Middle
East, especially the UAE, have come a long way in the past few decades,
becoming liberal in terms of incentives and attracting diverse industries.
Located along the Persian Gulf
within the Middle East, the UAE has benefited from global trade as a
transshipment location between Asia and Europe. In addition, as the region
lessens its dependence on oil exports, it is encouraging diversification into
other industries
Within the UAE, most free zones
are concentrated in Dubai
The general incentives offered by
the UAE Free Zones are more of less are the same.
i.e.:
v
Up
to 100% ownership,
v
complete
exemption from customs & excise
v
repatriation
of capital & profits
v
extended
leases
v
Quick
approval process
v
Easy
availability of legal, immigration and other facilities.
Jabel Ali Free Zone – A Pioneer
Jabel Ali Free Zone is one of the
world’s largest free zones specialised in industry, trade, and logistics. Established
in 1985, it has played a vital role in attracting international partners in the
UAE. Its smooth functioning has resulted in a boost to the economy of both
Dubai and the UAE.
Jabel Ali Free Zone demonstrated
the potential of Free zones in the region. As per JAFZA website “In over 3
decades, Jafza grew from 19 companies in 1985 to more than 500 in 1995, and
over 7,500 today, which includes nearly 100 Global Fortune 500 enterprises”
“Today,
Jafza proudly stands as a dynamic base for thousands of businesses from over
100 countries, sustains more than 135,000 jobs and attracts 23.9% of Dubai’s
foreign direct investment.”
It contributes more than 33% and 10%
of Dubai’s and UAE’s Gross Domestic Product (GDP) respectively.
World’s
big companies that based in Jebel Ali for manufacturing and production such as Nestle,
Mars, Unilever, PepsiCo, Kraft Foods, Heinz, and so on.
Jabel Ali Free Zones has been an
inspiration for setting-up other free zones. Currently, there are 46 Free Trade
Zones in the UAE.
List of Free Zones in UAE
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Free Zones in Dubai
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1
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Dubai Airport Free Zone
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2
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Dubai Auto Zone
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3
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Dubai Cars and Automotive Zone
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4
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Dubai Design District
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5
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Dubai Flower Centre
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6
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Dubai Gold and Diamond Park
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7
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Dubai Healthcare City
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8
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Dubai Industrial City
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9
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Dubai International Academic City
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10
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Dubai International Financial Centre
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11
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Dubai Internet City
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12
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Dubai Knowledge Park
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13
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Dubai Logistics City
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14
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Dubai Maritime City Authority
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15
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Dubai Media City
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16
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Dubai Multi Commodities Centre
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17
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Dubai Outsource Zone
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18
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Dubai Science Park
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19
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Dubai Silicon Oasis
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20
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Dubai Studio City
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21
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Dubai Techno Park
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22
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Dubai Textile City
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23
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Energy and Environment Park
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24
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International Humanitarian City
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25
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Jebel Ali Free Zone Authority
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26
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Jumeirah Lakes Towers Free Zone
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27
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Dubai Production City
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Free Zones in Abu Dhabi
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1
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Abu Dhabi Airport Business City
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2
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Abu Dhabi Global Market
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3
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Abu Dhabi Ports Company
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4
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Higher
corporation for specialized economic zones/ ZonesCorp
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5
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Industrial City of Abu Dhabi
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6
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Masdar City
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7
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TwoFour54
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Free Zones in Sharjah
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1
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Hamriya Free Zone Authority
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2
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Sharjah Airport Free Zone Authority
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3
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USA Regional Trade Center Free Zone
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Free Zones in Fujairah
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1
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Creative City Fujairah
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2
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Fujairah Free Zone Authority
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Free Zones in Ras Al Khaimah
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1
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RAK Investment Authority Free Zone
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2
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RAK Maritime City
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3
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Ras Al Khaimah Free Trade Zone
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4
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Ras Al Khaimah Media Free Zone
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Free Zones in Umm Al Quwain
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1
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Umm Al Quwain Free Trade Zone
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Free Zones in Ajman
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1
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Ajman Free Trade Zone
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2
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Ajman Media Free Zone
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UAE Free Zones & VAT
Generally, free
zones are considered as VAT free. However, in the UAE, all free zones are not
VAT free.
As per provisions of UAE VAT Law
& executive regulations, VAT Free Zones are known as “Designate Zones.”
A Designated Zone is a specific
fenced geographic area that has security measures and customs controls in place
to monitor entry and exit of individuals and the movement of goods to and from
the area.
Further, Free zones are identified
explicitly by way of Cabinet Decision as Designated Zone. Where Free Zones are
not a Designated Zone, it is treated like any other part of UAE.
A designated Zones are areas considered
by the UAE cabinet outside the scope of UAE VAT for certain limited cases. All
transactions are not considered as VAT free (Outside the scope of VAT);
Accordingly, business in Designated Zone may be required to register, account
for VAT, file VAT returns and pay VAT as per law & regulation.
VAT Provisions for Designated
Zone Transactions
VAT law & regulation
provisions applicable to the business are complex in nature. Let us see some of
the general rules
v
Supply
of services:
Place
of supply for service transactions are treated as same as mainland transaction.
Hence, it is taxed as per mainland transactions.
v
Goods
supplied within a Designated Zone:
A supply of goods made within a
Designated Zone (i.e. where both the supplier and customer are in the
Designated Zone) will generally be outside the scope of VAT provide the goods
are not consumed within the Designated Zone.
v
Import
from Outside UAE:
Goods
that arrive into a designated free zone from outside the UAE are not treated
as imported into the UAE. Therefore, no customs duty as well as VAT is charged
on such arrival of the good.
v
Transfer
of goods from UAE the mainland to Designated Zone:
Supply
or transfer of goods into a Designated Zone from a place in the UAE which is
not a Designated Zone is not an export for VAT purposes and therefore will not
give rise to zero-rated VAT treatment.
v
Transfer
of goods between Designated Zones:
It treated as out of the scope of UAE VAT, as long as the goods are not
released into circulation, used, or altered in any way during the transfer
between the Designated Zones, and the transfer is undertaken in accordance with
the rules for Customs suspension per the GCC Common Customs Law.
v
Transfer
of goods from Designated Zone to Mainland: A movement of goods from a
Designated Zone to the mainland is considered an import of goods into the UAE
and is hence Custom duty and VAT is payable on such import.
-: The End: -
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