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by Alison Luke on Saturday, 23 May 2009
zoomAdjacent to sharjah airport international Airport, SAif zone that was set up in 1995, offers warehouses spanning an area of 125M2 to 600m2.
Construction Week takes a closer look at Sharjah's free zones: what are the benefits of operating in these areas and how do construction projects gain from their existence?
Could Sharjah be the best place from where to conduct your business in the Middle East? If news from the Special Economic Zones (SEZ) Forum held in the Emirate in mid-May is any indication of times ahead, then the answer may be yes.
Incentives put in place by the government ensured that foreign trade rose to US $17.2 billion (AED63 billion) in 2008, according to reports from the Forum. In addition, Ali Salem Al Mahmoud, director general of the Economic Development Department in Sharjah reported that the industry sector contribution in the GDP increased from $1.5 billion in 2004 to $3.3 billion in 2007.
The cost of setting up a business in Sharjah is less than in other Emirates and the focus on industrialisation has turned it into a commercial centre with an annual growth rate of 12%. The Emirate currently accounts for more than 40% of all industrial activity in the UAE.
Among the major contributors to this success are the Emirate's free zones, which provide the base for many of the foreign firms that wish to invest and operate in the region. A concept introduced by the UAE government to enable foreign investment without ties to local firms, the free zones are playing a vital part in the growth of the economy.
The construction industry is benefiting from this in two ways: the ability to set up in the UAE without altering their global company status and operational methods; and secondly, the ease with which foreign firms can operate in the free zones has meant a wider choice of international standard services and products are readily available in the local market.
Two zones currently operate in Sharjah: Al Hamriya Free Zone and the Sharjah International Airport Free Zone (Saif). Both of which have reported large growth over the past few years, with more expected. Reports from the SEZ Forum indicate a rise in industrial facilities within the zones from 180 in April 2001 to more than 2000 in mid-2008; investments rose from $500 million to $2 billion during the same period.
What is a free zone?
Free zones are trading areas that enable foreign investors to operate within a country while maintaining their international status and working procedures.
They remove the need for the involvement of local investors in their firms and ensure that 100% of profits are maintained within the original firm. With benefits including tax-free trading, they are intended to encourage the investment of foreign firms within the region and increase the overall economic growth.
License types
Four types of license are available for firms operating within the zone:
• Industrial - which allows the import of raw materials intended to manufacture, process or assemble a specified product;
• Commercial - which allows the holder to import, export, sell, distribute and store specified items;
• Service - which allows the firm to carry out specified services solely within the free zone;
• National Industrial - which gives duty exemption on products imported into the AGCC States and provides the license holder with the same status as local or AGCC companies inside the UAE.
Operating within SAIF
To operate from within the Saif Zone, a company has to be incorporated. The legal status of the companies in the Zone are classified as follows:
• Company branch; two options are available: branch of a foreign company or of a local company.
• Free zone company (FZC): two or more can establish a FZC with a minimum capital of AED150,000. Normally a maximum of five shareholders is allowed; this can be increased to seven with approval from the Saif-Zone management.
• Free Zone Establishment (FZE): an individual can establish a FZE with a minimum in Saif-Zone, therefore there is only one owner (shareholder), with a minimum capital of AED150,000.
The benefits of free zones
• 100% company ownership (ie no need for local partnership)
• 100% exemption from income and corporate taxes
• 100% repatriation of capital and profits
• Fast issuing of trade license, often within 24 hours
• Exemption from commercial levies
• Locations are adjacent to bulk trading and transit areas such as airports or sea ports
• Range of accommodation options offered on a lease basis
• Simplified sponsorship and visa process for staff
Free zones are trading areas that enable foreign investors to operate within a country while maintaining their international status and working procedures.
They remove the need for the involvement of local investors in their firms and ensure that 100% of profits are maintained within the original firm. With benefits including tax-free trading, they are intended to encourage the investment of foreign firms within the region and increase the overall economic growth.
License types
Four types of license are available for firms operating within the zone:
• Industrial - which allows the import of raw materials intended to manufacture, process or assemble a specified product;
• Commercial - which allows the holder to import, export, sell, distribute and store specified items;
• Service - which allows the firm to carry out specified services solely within the free zone;
• National Industrial - which gives duty exemption on products imported into the AGCC States and provides the license holder with the same status as local or AGCC companies inside the UAE.
Operating within SAIF
To operate from within the Saif Zone, a company has to be incorporated. The legal status of the companies in the Zone are classified as follows:
• Company branch; two options are available: branch of a foreign company or of a local company.
• Free zone company (FZC): two or more can establish a FZC with a minimum capital of AED150,000. Normally a maximum of five shareholders is allowed; this can be increased to seven with approval from the Saif-Zone management.
• Free Zone Establishment (FZE): an individual can establish a FZE with a minimum in Saif-Zone, therefore there is only one owner (shareholder), with a minimum capital of AED150,000.
The benefits of free zones
• 100% company ownership (ie no need for local partnership)
• 100% exemption from income and corporate taxes
• 100% repatriation of capital and profits
• Fast issuing of trade license, often within 24 hours
• Exemption from commercial levies
• Locations are adjacent to bulk trading and transit areas such as airports or sea ports
• Range of accommodation options offered on a lease basis
• Simplified sponsorship and visa process for staff
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