What is a free zone and what does it mean for international trade?
The term “free zone” is a term that we often hear about in the world of international trade. By definition, a free zone is a part of the national or community customs territory in which the goods are considered “not to be in that territory”. These goods have a special customs status.
Companies located in free zones can not only store their goods there but also transform raw materials into finished products. These goods imported or processed in free zones are exempt from import duties, taxes, and commercial policy measures.
There are also urban free zones that allow businesses located there to benefit for a fixed period of various advantages, for example, the total or partial exemption from income tax, exemption from VAT, exemption from employer contributions, or exemption from health insurance contributions.
The free zones existing in several countries are of great use for international trade. They allow companies to manage the routing of their products better and to create regional distribution centers that will enable them to supply their distribution networks or end customers directly. For countries where the import of certain products is subject to restrictions, free zones allow these products to be stored in the customs territory without limitation, so that they can be exported to their final destination later. They also make it possible to reduce the formalities for setting up in a new country.
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