- Overview
Before creating free zones, foreigners couldn’t incorporate their companies in the UAE mainland without having a UAE national acquiring 51% of the company and acting as an agent.
The concept of free zones was created to encourage investors and foreigners to incorporate them in UAE. Therefore foreigners can enjoy 100% company ownership and any other incentives.
- Explanation
Aside from acquiring 100% ownership, one of the free zones’ main advantages is that companies are exempted from paying taxes, both corporate and personal tax.
Having said this, all people wishing to operate in the GCC should consider UAE’s free zones to incorporate in being a really good Hub for foreign companies and looking into the diverse benefits it offers.
In 2016, the UAE and the other five countries that the GCC is constituted of signed a Uniform Agreement on VAT and agreed on implementing the same VAT rate in all these six countries of 5%.
It is worth mentioning that some services and products are exempted from VAT, such as the supply of residential buildings, certain financial services, etc.
Therefore, UAE nowadays imposes VAT. Companies should be aware of this duty whenever it makes a turnover above 375,000 Dirham or approximately 100,000$. In this case, the company must register for VAT whenever it makes such a turnover within 12 months.
Companies selling goods or services exempted from paying VAT and making a turnover higher than 375,000 Dirham within 12 months must also register for VAT, but they can apply for an exemption.
Businesses need to file VAT returns every three months.
Along the same lines, it is essential to mention that exports are exempted from VAT.
For example, a person has incorporated his business in Dubai Airport Free Zone Authority or DAFZA and conducts business mainly exporting goods to other GCC countries. In this case, no VAT will be applied to these goods.
If the same company wants to import the goods inside the UAE, the company must pay a VAT of 5%.
- Why is it important?
Getting acquainted with the tax structure in the UAE free zones is very important to help foreigners decide where to incorporate their business if they aim to have a Hub in the GCC where UAE free zones are considered one of the best.
- How can a lawyer help?
Since there are more than 20 free zones in the UAE today, it gets quite confusing to decide which one will best suit your company.
Like why choose DAFZA and not Dubai International Financial Center or Dubai South.
Making this choice can be challenging since you need to get acquainted with the different advantages each one offers, and this is where we come in.
We can help you figure out which free zone suits your needs at its best, so visit lexyom.com and book an online consultation with a lawyer, and we will take it from there.
