GCC customs law revision to benefit UAE free zone firms

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Free zones in the UAE will soon benefit from a duty-free trade with GCC states and other countries with whom the country has free trade agreement, Emirates Business has learnt.

Goods exported from the free zones are currently treated as foreign goods and are thus not entitled to benefit from the GCC Unified Customs Law, which eliminates customs duties among member states.

Companies in the free zones - except those wholly or at least 51 per cent owned by UAE nationals or GCC nationals - are required to pay five per cent customs duty.

"We fought for the past two years to include the free zones in the free trade agreements and we have won at last because we have the local governments and the ministries, including the foreign ministry, supporting us in this case," said Ali Al Fayed, Manager, Department of Exports Origin, the Ministry of Economy. "Under the current companies law, a national company is one which is owned 51 per cent by a national but this is being revised in the new company law. Once clauses 85 and 88 of the Unified Law is abolished, all products being exported to the Arab League by national or non-national company will be able to have the same preferential treatment."

According to Article 85, goods taken out from the free zones into the customs office are treated as foreign goods even if incorporating local raw materials or articles on which customs duties and taxes have been collected prior to their admission into the free zones.

Article 88 on the other hand says goods imported from the free zones and duty free shops into or exported out of the country shall be treated as foreign goods. "We are trying to do our best to get a quick decision from the GCC as one party," he said.

"This case is very important because we have very large industries in free zones. When we apply the FTAs with EU, Singapore and New Zealand, it will be applied automatically. But we still have a problem internally in the GCC," he said. "I think all GCC countries are facing the same problem. They are trying to escape at this point to put a new name like economic zones but the law applies to the same kind of investors."

Al Fayed said the UAE has four FTAs - with EU, Singapore, New Zealand and Asia Pacific.

By Karen Remo-Listana

© Emirates Business 24/7 2009