DIFC and ADGM: What Makes Them Different from Other UAE Free Zones?
The United Arab Emirates, UAE, has several free zones that offer many facilities to foreign businesses. Free zones play a crucial role in attracting foreign investment and rapid economic growth. They provide companies with simple means of expanding their business and operations, from tax breaks to 100 percent foreign ownership. Two of the most prominent free zones are the DIFC free zone and the ADGM free zone, both focused on financial services.
This blog will discuss what sets DIFC and ADGM apart from all the free zones available in the UAE, including the DMCC free zone formation and the Dubai Silicon Oasis free zone. We’ll also explain how these zones compare and why a company may prefer one over the other.
What Are UAE Free Zones?
Free zones are designated business areas that facilitate the businesses of international companies in the UAE. The free zones provide the following benefits to the companies:
- 100% foreign ownership-cum-no local sponsor
- No customs duty
- Repatriation 100%
- No corporate or income tax
- Easy and rapid company setup procedures
- Smooth visa application procedures for the employees.
There are more than forty free zones, each designed to cater to specific business needs and industries. Two highly recognised free zones have actively been involved in financial services; we will discuss these two free zones extensively in this article: the ADGM free zone and the DIFC free zone, among others, like the DMCC free zone and the Dubai Silicon Oasis free zone.
DIFC Free Zone: Dubai International Financial Centre (DIFC) is one of the significant financial centres in the United Arab Emirates, the Middle East, Africa, and South Asia. The DIFC free zone was initiated in 2004 to cater to companies involved in the provision of wealth management, banking, legal, and financial advisory services.
Key Features of DIFC:
- Independent Regulation:
The Dubai Financial Services Authority (DFSA) regulates all financial activities in the DIFC according to international standards.
- International Legal Framework:
Based on the English common law system, this place not only feels safe but also very comfortable for foreign investors and businesses.
- Business Diversity:
DIFC has an extremely rich business environment and is home to more than 3,000 companies, from global financial institutions to law firms.
- Global Access:
DIFC’s location in Dubai strategically positions businesses to reach key global markets in Europe, Asia, and Africa.
What is ADGM Free Zone?
The Abu Dhabi Global Market is Abu Dhabi’s response to DIFC. Launched in 2015, it formed a free zone on Al Maryah Island with the core focuses of being a financial services hub, legal firms, and especially FinTech startups.
Key Features of ADGM
Emphasis on Financial Innovation: ADGM has been focused on financial innovation, such as FinTech, and support for several startups and technology companies.
Regulatory Authority:
FSRA manages all financial operations in ADGM following international regulatory standards.
International Legal System:
Like DIFC, ADGM applies the English common law system. This gives international companies an environment that is familiar with executing law.
Tech-Friendly Environment:
ADGM is quite attractive for startups, considering its regulatory sandbox. It allows companies to test new financial products and services in a controlled environment.
DIFC vs. ADGM: What Are the Key Differences?
While DIFC and ADGM share similar legal and regulatory frameworks as financial hubs, they have a few critical differences.
Location:
DIFC is located in The most cosmopolitan, and happens to be one of the busiest cities.
ADGM is located in Abu Dhabi, the UAE capital and within arm’s length of key government departments and authorities.
Industry Focus:
DIFC’s primary customers are already established global financial corporations, law firms, and wealth management organisations.
ADGM gives particular emphasis to FinTech and startups; hence is an innovation hub.
Year Established:
DIFC was introduced in the year 2004, and since then, it has emerged as an entirely developed global financial hub.
ADGM, a relatively new free zone, emerged in 2015 but has built tremendous momentum due to its focus on FinTech.
Startup Ecosystem:
ADGM focuses explicitly on startups and promotes them by providing favourable conditions, such as the support of the local regulatory body and modern solutions.
While DIFC is relatively more accessible to the more established financial firms, its doors remain open to smaller firms wanting a foothold in the financial sector.
Government Access:
ADGM’s housing businesses are relatively closer to Abu Dhabi’s government offices, which gives it an edge, particularly for firms that deal directly with government entities.
Being in the cosmopolitan city of Dubai, DIFC exhibits a more global environment and easier access to a broader international market.
Comparison of DIFC and ADGM with other free zones in the UAE
Now that we have seen the other free zones of DIFC and ADGM let’s see some other free zones of the UAE. Many free zones in the UAE specialise in different industries, such as the DMCC free zone setup and Dubai Silicon Oasis free zone.
DMCC Free Zone
One of the UAE’s most successful free zones is the Dubai Multi Commodities Centre. More often referred to as the DMCC, it was formed in 2002 and acts as the world’s global hub for trading commodities, especially gold, diamonds, and other precious materials.
Industry Focus:
Commodity trading has been a major offering in the DMCC free zone; however, support is provided for other business operations, such as technology, trade, and legal services.
Company Setup:
The free zone offered by DMCC has facilitated businesses to get their operations started through an efficient and straightforward company formation process.
Strategic Location:
Locating its facility in Dubai, the free zone offered by DMCC provides access to international markets and high-class infrastructure.
Dubai Silicon Oasis Free Zone
Dubai Silicon Oasis is another vital player that specialises in innovation and technology. It offers excellent infrastructure and support to attract global tech companies and startups.
Tech Focus: The Dubai Silicon Oasis free zone can accommodate businesses oriented toward the technology, R&D, and innovation industries.
In addition, the free zone will provide infrastructure and unique incentives that respond to the needs of growing and successful tech startups.
Infrastructure: The DSO-free zone provides modern facilities for research, innovation, and development, such as dedicated research centres, incubators, and innovation labs.
Why do DIFC or ADGM stand out from other free zones?
In selecting a free zone in the UAE, business needs and objectives must be targeted, and below are just some of the points that would see companies end up with either DIFC or ADGM over any other free zone:
Financial Focus:
Both DIFC and ADGM have been tailored for businesses within the financial services sector and are, therefore, best suited for banks, legal firms, wealth management, and FinTech companies.
International Standards:
DIFC and ADGM are well-benchmarked on international standards in a legal and regulatory system, giving businesses a familiar and trusted environment.
Access to Global Markets:
Dubai and Abu Dhabi are gateways to global markets, and these free zones offer business opportunities worldwide.
Support for Innovation:
FinTech innovation companies find ADGM an accessible destination, as it offers special support for such startups. DIFC is not dogmatic and encourages innovation, especially in wealth management and legal services.
Regulatory Environment:
DIFC and ADGM offer businesses a safe, transparent, and well-regulated environment, which is the case for highly regulated industries such as finance.
Conclusion
There are many free zones catering to various industries and business needs in the United Arab Emirates. Due to their strong regulatory frameworks, emphasis on financial services, and international legal systems, the DIFC and ADGM free zones are important ones for financial companies. DIFC is an established financial hub within Dubai that offers access to the global market. ADGM is taking a newer route in Abu Dhabi and gaining rapid ground with FinTech and innovation.
Other free zones include Dubai Silicon Oasis and DMCC, which offer great opportunities for technology and commodities trading. Dubai Silicon Oasis offers high-class infrastructure to tech startups, while the DMCC free zone is easy to set up companies, hence making it the top option for commodity companies.
Therefore, they could seek the advice of NH Management on the best free zone to use. NH Management, in turn, offers customised consultancy services to companies to advise them on how best to undertake free zone formation, thus creating a smooth and effective entry into the UAE market.
