Free Zone
Reviewed by A designated area with a special legal and tax regime designed to attract business and investment.
A free zone (free economic zone) is a designated area within a country that operates under a special legal and tax regime created to attract business and investment. Companies registered there often benefit from reduced taxes, simplified customs, and full foreign ownership, subject to the rules of the specific zone.
Business set-up sometimes accompanies residence planning: in some countries owning a free-zone company can support certain residence routes, but a free-zone company is not in itself a residence or citizenship status, and substance and physical-presence conditions vary.
The benefits and conditions of a free zone depend on the country and the particular zone, so any link to a residence route should be verified for the specific jurisdiction.
FAQ
Does setting up in a free zone come with residence rights?
Not automatically. In some countries a free-zone company can support residence applications for its owner and staff, but whether the option exists, and on what quotas and presence conditions, depends on the country and the zone.
How is a free zone different from an offshore jurisdiction?
A free zone is a real area inside a country with its own legal and tax regime and normally an expectation of activity on the ground. An offshore company is registered abroad mainly to hold assets or run international operations.
Do the zone's tax incentives mean I pay nothing personally?
No. Incentives attach to the company and its operations, while your personal tax follows your own tax residency. Dividends and other distributions may still be taxable where you are resident.
Can a free-zone company trade in the local market?
Such companies are usually geared to export and international business, and selling onshore typically requires a separate licence, a local presence or a partner. The restrictions are set by the country and the individual zone.
Are a real office and staff required?
Increasingly yes: economic substance requirements such as premises, employees and local management affect both the incentives and your ability to open bank accounts. The bar varies by zone and has been tightened over time.