Jafza settles export tax controversy

Jebel Ali Free Zone Authority (Jafza) has reached a special agreement with the UAE Federal Customers to ensure that companies based in the free zone remain tax-free.

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By  Robeel Haq Published  December 1, 2005

Jebel Ali Free Zone Authority (Jafza) has reached a special agreement with the UAE Federal Customers to ensure that companies based in the free zone remain tax-free. The settlement follows an unexpected memo sent to Jafza companies in October ordering the payment of US $68 per metric tonne in export duty. The message sparked outrage amongst scrap metal companies, many of whom faced arrears amounting to millions of dollars. Whilst some companies immediately stopped their export activities after receiving the memo, others allegedly started misdeclaring goods to overcome the problem. “The situation initially created a lot of panic amongst different companies,” stated a steel dealer in Jafza. “Even companies not dealing in scrap metal were worried about their future. The amount of money being demanded in tax was unaffordable for several dealers.” With the risk of losing investor confident, Jafza reacted to the sudden tax demands and negotiated a deal with the customs authority. “The Jebel Ali Free Zone Authority has secured a special agreement with the UAE Federal Customs, ensuring the free zone formula remains in place,” confirmed Salma Hareb, chief executive offer, Jafza. Any company based in the free zone and generating scrap metal during its production processes is exempt from the $68 per metric tonne charge when exporting to other countries. In addition, dealers in the free zone can purchase the scrap metal from such companies, and export to other countries without paying the tax. “Free zone companies are not liable to pay tax on transactions within the free zone,” said Hareb. “If companies have received letters to the contrary, they should contact Jafza and we will investigate.” Local scrap dealers have reacted positively towards the quick response from Jafza. After the initial panic, the local scrap metal market is now returning to normal. “Jafza listened to everyone’s concerns and reacted quickly,” continues the steel dealer. “Initially there was no communication from Jafza, but we kept calling them, and they eventually clarified the situation.” Jafza is home to around 1000 scrap dealers, including some of the biggest in the region. Whilst the majority are now returning back to business as usual, some are still weary following the experience. “Jafza has provided a verbal agreement confirming the export duty is not applicable to our company,” said the marketing manager of a free zone company. “However the whole scenario should never have occurred.” “A lot of companies based in Jafza suffered. For instance, we stopped exporting scrap metal after receiving the memo, which resulted in loss of revenue,” he added. “The decision on whether to start re-introducing those services again is being made by the management of our company.”

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