Economic free-zones or tax-free zones are zones that countries or states use to attract new international investment and to boost economic development.
It is estimated that between 2600 - 2900 economic free-zones exist around the world, and has often been used in developing countries. There are free-zones in China, Sri Lanka, Belarus, Russia and Dubai to name a few countries and states. But also most EU countries have used this design to boost the development for a long period of time including countries such as France, Latvia and Ukraine.
Within Europe there are currently over 50 economic free-zones, and an estimated 43 million people are working in these free-zones worldwide.
An economic free zone is a defined area within a country or state where exceptions from the national legislation in the form of benefits regarding tax and duty exemptions exist. Moreover, there is usually a generous labor law and environmental legislations can sometimes be overridden. Moreover, there are low tariffs regarding infrastructure.
How these areas are designed and what mechanisms should be used is up to each country or state, although there are restrictions in the EU member states how these zones may be constructed, with the strict competition laws.
The introduction of a free-zone aims to reduce social problems and to even out the differences in education and employment levels. This results in that the various benefits in the free zones are time limited, and then with various yearly intervals for various benefits. The benefits that most often are affected are payroll taxes, labor taxes, capital taxes, corporate taxes and more.
There are countries and states that have supplemented final establishment packages for business and its owner through their free-zones, which results in that the establishment process only needs to take a few weeks and everything is very controlled and cost effective. A start-up package usually includes everything from a new office to a new bank account.
For example, Dubai and the United Arab Emirates are such states. Dubai offers complete start-up packages for business and its owner, and a 50-year contract is received at the establishment within their respective zones, DAFZA, Dubai Airport Free Zone, JAFZA and Jabal Ali Free Zone.
These are free zones with modern infrastructure and where there is a total exemption from taxation and very few economic restrictions in general.
In conclusion, a free zone is a powerful tool for achieving rapid growth and development.
Tony Harkén