A free zone company refers to a business established within a designated free trade zone that benefits from related fiscal incentives.
Characteristics:
- Physically located and administered under free zone authority regulations.
- Exempt from import duties and certain taxes on procured goods that will be re-exported after value-addition activities.
- May import capital equipment and raw materials without customs clearance formalities.
Operations:
- Common activities include warehousing, packaging, assembly, and light manufacturing.
- Goods purchased from the local market face applicable customs levies upon import.
Example Role:
By forming a free zone company, a logistics provider seamlessly consolidated shipping containers shipped from various Asian ports into a centralized transloading facility prior to onward delivery throughout the continent.
Significance:
Free zone status offers tax advantages that reduce costs for companies focused on international trade, incentivizing investment to generate exports and foreign exchange.