Free ports, free zones, free warehouses and free trade zones can be considered foreign territories in the fiscal sense. By identifying such zones, many countries want to achieve that a duty- and tax-free intermediary trade can take place there. In addition, in some cases, these places also serve economic goals. Because in free trade zones, different tax rules apply than in the rest of the country. In this way, the raw materials imported there free of duty and used for the production of export goods can help to optimise the profits of the local companies. However, while free zones and free ports are also intended to serve a national economic purpose, free warehouses of a new kind are places where wealthy individuals can temporarily store special valuables. They are thus suitable as a safe place for valuable speculative objects. But here, too, the avoidance of a customs and taxable import is in the foreground. In this respect, they also represent an alternative to tax havens.

The oldest free port in the world is said to have been built on the Cyclades island of Delos. Thus, Strabon describes that in the period after 167 BC the Romans made sure that traders did not have to pay taxes. Indeed, archaeological finds from this period testify to the wealth of the population and thus the success of this measure. So many traders from near and far settled on Delos. Sailing to Delos was literally associated with anticipation. But after war and a pirate attack, the success story of Freeport 69 before Christ’s birth was over for the time being.

Next, the Hanseatic League came up with the idea of creating free zones. In the Middle Ages, it established an entire system of free zones in its sphere of power. For the traders of the Hanseatic League, the free movement of goods was one of the foundations that founded their economic success. After all, their business relationships were often based on interlocking supply chains. Thus, if duties and taxes had been incurred on each transaction, this would have greatly diminished the success of the merchants.

History repeats itself: When many centuries ago the trade of the Italian trading powers flourished along the Mediterranean coast, this of course also provided the state coffers with money. After all, tariffs have been part of everyday life for people who trade since time immemorial. The landing of goods has often been an occasion to impose duties and other taxes. But sometimes you basically wanted to store the goods only temporarily. This was the case, for example, if you made the sale to a merchant who just needed to pick up the goods on his next trip in a certain port. A permanent whereabouts of the goods, and thus a compelling reason for customs clearance at the place of interim storage, fell away. “Should we perhaps create an exemption?” the people responsible for customs may have asked themselves at some point. “After all, this could further promote trade.”

Based on such considerations, one of the first modern free ports, which we know at least in the Mediterranean sea area, went into operation in Livorno in 1675. Because the goods stored there were not allowed to enter the market without taxation. Indeed, the free port of Livorno is said to have contributed to a long-lasting and substantial strengthening of trade. No wonder that many more examples followed. Trieste, Bremen, Hamburg, even Duisburg, they all had or still have a free port.

The fact that success stories spread quickly can also be seen in the example of free ports. Over time, however, free ports also gave impetus to other ideas. What can be protected against immediate customs clearance and taxation when unloading ships can also be achieved at the end of other transport routes. Therefore, there are now also other storage locations, which are subject to special regulations in terms of customs clearance and taxation.

Consequently, the next logical step is the introduction of such free zones, which can be set up anywhere inland. But since they are not ports, these places are now called free zones or free camps, to name only two of the many synonyms. However, free zones certainly only make sense if the associated goods traffic takes place at this location. However, since the flow of goods in the past was mainly via sea routes, the potential of the inland free zones remained undiscovered for a long time.

Only with the onset of globalization in the Western world – in Asia it existed in a very similar form even long before Vasco Da Gama’s circumnavigation of the Cape of Good Hope (Ptak 2007) – did imaginative entrepreneurs and politicians discover further potential that could be used based on the basic idea of free ports. In 1961, for example, Shannon established the first free zone in Ireland, which was attached to an airport. And this too turned out to be a success story due to the increasing air traffic.

In addition to the creation of free zones for the pure interim storage of goods, some time later special free trade zones were introduced, in which companies should settle. Here they were able to develop their economic activity and take advantage of certain tax advantages. Because if they mainly produced goods for export, then they could import the means and raw materials imported for production duty unpaid. In addition, such areas are also ideal for the further processing and refinement of goods that you want to resell afterwards. This also saves customs and other taxes that would be incurred if the goods were to be imported into the country on a regular basis.

Many people all over the world now work in such special economic zones. In Southeast Asia in particular, many of these free zones have now emerged. For example, the Kaesŏng Special Economic Zone in North Korea is famous, where North Koreans worked for companies from South Korea for a time. But in the United Arab Emirates too, incentives have recently been created in a similar way to attract entrepreneurs. Here even tax exemptions wave on the company profit.

2.3.1. Speculative object art for the super-rich

And another offshoot created by the free port in our time: free warehouse for special goods. Normally, warehouses are known at best as dusty places, which are suitably equipped to store large quantities. But when the global economy collapsed due to the financial crisis following the bankruptcy of Lehman Brothers Bank, many rich people turned their attention to other investments. They discovered several areas in which investments seemed worthwhile. Above all, they were objects of art, especially paintings of old and modern masters, whose demand increased increasingly at that time. Often auctions even achieved astronomical record prices on their sale. But also antiques and classic cars rose rapidly in value. Even fine wines or whiskies and dinosaur skeletons changed into the camp of speculative objects of particularly well-off people.

The purchase and sale of such valuables is only one aspect of these investments. Because in order to gain added value from them, you also have to have a little patience. After all, the value should continue to rise. So what do you do in the meantime with these otherwise rather useless objects? The answer is, you have to store them.

2.3.2. Special features in the storage of valuables

If you buy such valuables at an international auction or purchase them in another way, this usually leads to an import into the country that you decide to remain. Importation, on the other hand, is usually accompanied by customs clearance and other duties. Under certain circumstances, one must then also continuously accept property tax to the partly considerable extent. Intermediate storage in an area where all this does not matter is therefore the perfect solution.

However, this storage location must also be suitable for storing these prezioses. This includes the necessary air conditioning, such as wine bottles, as well as fire protection and many other risk hedges. And, of course, the treasures must also be protected from possible theft by criminals of all kinds. Because those I was able to outbid at the last auction for my Picasso might be tempted to get the work in a different way. On the other hand, the destruction of rare valuables, which are not unique, could greatly increase the value of the remaining objects. This can also be a risk, because a competitor could have it on my Mercedes 540 K. If he also owns one, then the tragic loss of my car, for example by a fire attack on my garage, could well be worthwhile. So the storage location for the classic car should be able to offer far better protection than a simple garage.

2.3.3. The emergence of specialised free zones as free warehouses

That is why some time ago a free camp of a special kind was set up in Geneva. Here one has specialized in the storage of exactly such objects. It is a noble camp that was unique at the time. In the meantime, however, more have followed suit. There are now also comparable free warehouses in London, New York, Luxembourg and Singapore. Similar projects are planned for Dubai, Shanghai and Beijing. Yes, even in Germany there are such, albeit less well-known camps, for example in Meinigen and at Frechen. The Freilager in Meiningen, for example, is a former financial warehouse of the Deutsche Bundesbank, which was elaborately prepared for its new function.

Free zones are generally areas excluded from the collection of duties and import duties. In the EU, there is a separate legal definition for the introduction of goods into a free zone (Article 210 b UCC). Article 158 of the UCC provides that the importation of goods from third countries into a free zone does not require a customs declaration. Therefore, goods that enter a free zone are treated as goods that are still abroad.

During storage, however, customs may continue to monitor and control goods from third countries (Article 46, 134 UCC). The customs authorities are also allowed to monitor and control access routes to the free zone and persons entering and leaving it (Article 243 of the UCC). This also applies to the installations used to secure and demarcate the free zone.

The rules governing the creation of a free zone are also contained in the Union Customs Code (Article 243 UCC). It is therefore up to individual member states to establish a free zone. Consequently, we now look at the German regulations on this. The legal basis for this is in § 20 ZollVG. This law also refers to the definition of the free zone within the meaning of Article 243 of the UCC. However, in order to establish a free zone, you must first submit an application to the customs administration. The Federal Ministry of Finance then decides on the application. And as you can see from the example of the free camp in Meiningen, a positive decision is quite possible.

Free zones, where economic activities can also take place, offer a number of different advantages. In addition to the original advantage that duty- and tax-free handling of goods can take place in these places, the further processing and processing of economic goods without tax or other duties is also possible in free zones. In addition, free zones used for interim storage before resale offer the advantage that the owners of the goods gain liquidity by avoiding duties. The capital commitment thus remains limited to the goods alone.

But what can also be saved in free zones are the customs formalities associated with the import of goods. There are risks here too. This can be the case, for example, if an indication, a stamp or a signature should be missing on a specific freight document. Or if the tariffs increase during the time the goods are transported to such an extent that the import leads to a loss. The latter is the case, for example, when a trade war breaks out.

Furthermore, in the case of free trade zones under particularly favourable circumstances, even the profits earned there can be exempted from taxation. In some cases, the tax-advantageous import of the products is also permitted to a certain extent. Therefore, the regional market can also play a role in the distribution strategy.

Free trade zones also offer other advantages. Because often governments set up such free zones in areas where economic support should take place. Associated with this, the logistics infrastructure is often upgraded. The recruitment of workers is also usually easier in these regions.

It is also possible to optimise transfer prices for transactions with affiliates in other countries in order to benefit from further tax advantages elsewhere. For example, the establishment of a subsidiary in a tax haven could also be considered.

4.3.1. Benefits for special customers

In addition, free warehouses also offer other advantages. In addition to avoiding customs clearance or taxation, which would be incurred when importing assets and assets, there are advantages, for example in the area of storage and logistics in these mostly state-of-the-art facilities. In addition, such free warehouses specialized in very wealthy customers offer all possible comfort and service. If you are on site, for example, to hold a sales discussion, the sales negotiations can take place in a much more pleasant atmosphere than in a storage shed. This increases the chances of a successful negotiation. The service and the quality of the service also play a major role here.

Furthermore, a free warehouse, which serves for example the storage of works of art, is a place where you can receive other services without VAT. For example, if you want to carry out a restoration on a painting, then this remains tax-free in the free warehouse. The obtaining of valuations, in which the assessment takes place in the free warehouse, takes place without calculation of the otherwise incurred sales tax. Because otherwise only entrepreneurs are entitled to deduct input tax, this advantage is especially for private collectors of great advantage.

4.3.2. Benefits for dubious customers

In addition, such places provide a certain discretion. If, for example, you want to avoid certain assets being involved in an imminent dispute, then you can certainly avoid this by storing them in a free warehouse. This is the case, for example, in the case of a divorce or the settlement of other claims. Some even use free warehouses to conceal the acquisition of illegally acquired assets. This includes, for example, objects sold by tomb robbers from archaeological sites. However, such illegal purposes are responsible for the fact that free camps received a questionable reputation in the past.

Of course, all this should be refrained from, and any but that could initiate the next sub-paragraph is basically irresponsible. The fact is, however, that this does not diminish the attractiveness of free warehouses. The security associated with the storage of valuables in these places is also an extraordinary advantage that all customers perceive. And to emphasize it again: the storage of valuables in a free warehouse is in principle legal. This of course also applies to the associated tax avoidance.

Free zones are only suitable for certain purposes. If we concentrate our conclusion on free warehouses, which in our time continue the original idea of free ports, then it quickly becomes clear that the basic idea has remained the same. After all, it is primarily a question of avoiding taxation and customs clearance of goods. In every other respect, however, modern free warehouses are hardly comparable to the free ports of bygone times.

However, this one tax aspect is sufficient to embody the essence of these special free zones. Because in such places, the owners can resell their assets stored there tax-free. Whether the buyers are now willing to pay taxes or whether they also decide to continue entrusting the acquired assets to a free warehouse is of course up to them.

But other economic free zones are also notable. After all, they are a significant part of today’s globalized economy. So if you want to start a company abroad, you should certainly consider the local advantages that free zones in particular have to offer when choosing the location.

In any case, free zones of all kinds can be considered as an alternative for tax havens. Both tax havens and free zones are quite attractive from the point of view of those who want to secure a tax advantage. But it depends on the circumstances whose purpose is to avoid taxes. Therefore, a differentiated analysis of the advantages and disadvantages of certain activities in connection with free zones and tax havens is of course useful. At least if you purchase art or other valuables as speculative objects, storage in an all-round secure free warehouse is quite an alternative to a mailbox company with a bank account in a tax haven. In both cases, this is usually done anonymously and discreetly.