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After the discovery of oil in the mid-1960s, the UAE began its transformation into a financial epicentre. But for the first 20 years of this transformation, the country’s relatively small population and reliance on oil money meant it lacked the economic diversity to fully take advantage of its position on the world stage. And so it was that in the early 1980s the concept of the UAE free zone came to life.
One of the main goals of the UAE free zones was to diversify the economy by making the region attractive to a wider array of industries – essentially opening up the country to a much greater influx of foreign investment by making the investment climate more attractive. The original free zone opened in the 1980s, setting the template for the many that followed, and today there are around 40 across the UAE.
The advantages of setting up a company in a UAE free zone
The main advantage offered by the UAE free zones is that foreign investors can retain 100% of their businesses without the need for a local partner. Outside of free zones, non-UAE residents are not allowed a majority stake in the business if that business requires a commercial or industrial license, and must therefore set up with a local partner who takes a minimum ownership of 51%. Other financial incentives of the UAE free zones include a 0% corporate and income tax rate, no customs duties levied on imports and exports, and the option to repatriate 100% of the profits from the business.
Another factor which can present fantastic opportunities to free zone companies is that many of the UAE free zones are sector specific. This gives its entrepreneurs ready access to a hub of knowledge and expertise from others within their field.