The UAE has long been considered one of the most attractive destinations for any aspiring entrepreneur. Free Zones are business jurisdictions designed to draw the attention of foreign investors, offering lower taxation rates, strategic business locations, and access to one of the fastest emerging markets. Additionally, these Free Zones are backed by the full support and commitment of the UAE government, making this region one of the best markets in the world for potential entrepreneurs and established businesses alike. But what exactly are these Free Zones, and how do they work?
What is a Free Zone?
A Free Zone, or Free Trade Zone, is a special economic area where foreign investors and businesses can operate while taking advantage of an exclusive array of tax-free benefits. These jurisdictions were created to attract foreign investors and boost international trade in the region. In addition to the minimal tax responsibilities, ex-pats are allowed complete ownership of their companies and can return 100% of their profits to their nation of origin.
There are over 45 Free Zones operating across the Emirates, each one catering to a specific set of business activities. For example, Dubai’s Health Care City is one such jurisdiction that serves the healthcare sector. These Free Zones are presided over by independent Free Zone authorities responsible for issuing, operating, and regulating licenses for these business activities.
These Free Zones have found a tremendous amount of success in recent years thanks, in part, to strong governmental support, clear vision, and a well-developed economic growth strategy.
Why Set Up Your Business in a Free Zone?
If you’ve given thought to Free Zone setup in the UAE, there has never been a better time. Below, we’ve put together a list of some of the most significant benefits of forming your business in one of the UAE’s many Free Zones:
1. Easy Setup
The setup procedure in Free Zones is designed to be incredibly straightforward. This application process will greatly depend on your chosen business activity and the jurisdiction surrounding it. In many cases, you’ll only be required to provide some basic documentation such as business information and copies of passports. The process is efficient and, in most cases, only takes a few weeks. Additionally, many Free Zones offer Flexi-desk and virtual-desk packages that allow you to use a Free Zone address and facilities as needed.
2. No Tax Responsibilities
A prominent contributor to any business’ success in these Free Zones is the lack of tax responsibilities. With 0% corporate and personal taxes, exemption from VAT, and no import and export taxes, your business can reach its maximum potential while keeping more of what you earn.
3. Foreign Ownership
Another significant benefit is complete foreign ownership. In some jurisdictions, foreign investors must partner with local sponsors that own a majority stake in your business. However, Free Zones allow you to maintain 100% ownership of your business.
4. Trade within the UAE
Free Zone businesses are typically not permitted to trade directly with the local UAE market. However, by working with a locally appointed distributor, you can move your products to the market for a nominal fee. Alternatively, you may choose to open branch offices of your business throughout the Emirates. These branch offices can be used to market your products or services within the UAE mainland.
5. Support and Assistance
Free Zone authorities are on hand to offer support during your business setup process and beyond. Most Free Zone jurisdictions assist with visa applications, opening corporate bank accounts, and accessing networking services and startup hubs.
The Benefits of Setting Up Your Business in a Free Zone
• Complete foreign ownership with no local sponsorship required
• Full repatriation of profits earned
• Tax-free business zones
• No controls over foreign currency exchanges and no limits on funds transfers
• No duties charged for goods of any type
• Inexpensive energy costs in all Free Zones
• Abundant office spaces for sale and rent
• Easily obtainable visas for skilled workers
• No timing restrictions on officer operations
How to Set Up a Business in a Free Zone?
Incorporating your company is an extensive process! And to ensure your success, you will want to keep the points mentioned below in mind:
1. Choose Your Business Activity
There are hundreds of business activities to choose from, with multiple activities possible under a single license. Your business activities will determine both the cost of your licensing application and the Free Zone that will best suit your needs.
2. Finalize Your Company Name
Deciding on a company name can be a challenge, no matter where you are. But in the UAE, you will need to submit your trade name request to the relevant authority. This trade name may not be previously chosen by another business and may not include profanity or offensive language. To ensure that the process goes smoothly, you may want to work with a company formation specialist who can help you.
3. Finalize Paperwork and Submit Application
Setting up a business in a UAE Free Zone typically requires a few standard documents. These documents include:
• Completed application form
• Passport copies for all shareholders
• Business plan
• Memorandum of Association
Working with a knowledgeable business consultant during this process can ensure a smooth transition.
4. License Notification and the Opening of your Business Account
You’ll be notified as soon as your license application is approved. At this point, you’ll be able to collect your corporate documents and get to work! With this paperwork in hand, you can open your corporate bank account and start trading! Your Free Zone will have excellent resources to help you pick the right banking institution for you.
5. Visa Processing
The final step in the business setup process will be your immigration and visa processing. Free Zone authorities and company formation experts can help you manage this application process on your behalf.
Do you still have questions about Free Zone business setup in the UAE? No need to worry! We have a team of experts with years of experience in forming businesses in Free Zones. Connect with us for a free consultation to learn more about some of the best advice and solutions for your business requirements. Forming your business has never been easier, thanks to MSZ Consultancy. We will assist you in handling necessary paperwork, annual renewals, PRO services, and much more from beginning to end. Give us a call today at +971 52 544 1248 and let our business consultant experts help you maximize your business’ potential!
Frequently Asked Questions
Forming a business in the UAE is designed to be approachable and straightforward. However, it is part of a large journey, and you’ll need to perform plenty of research along the way. To help, we’ve put together answers to some of our most frequently asked questions:
1. Can Free Zone companies do business in the Mainland?
Free Zone jurisdictions do not permit companies registered in Free Zones to conduct business in Dubai’s Mainland. Most trading companies in Free Zones are wholly restricted from doing business there. However, certain professional activities are given leeway. For example, a company established in a Free Zone is permitted to sell products in the Mainland, provided they operate under restrictions imposed by UAE law.
2. What is the cheapest Free Zone in UAE?
• Ajman Media City (AMC)
• Sharjah Media City (SHAMS)
• Sharjah Publishing City (SPC)
• International Free Zone Authority (IFZA)
3. What is the difference between a Free Zone company and an LLC?
Free Zone businesses are limited to a select amount of visas. This is typically between 1 and 6 visa packages. If a company requires more, you will have to rent additional physical spaces within that Free Zone. LLCs, however, receive an electronic quota from the Ministry of Labor (MOL) for their visa eligibility.
4. What are the documents required to set up a Free Zone company?
• Application license form
• Business card
• Business plan outline
• Memorandum of Association
• Articles of Association
• Copies of Passports
• Bank reference letter
• Licenses of all partners
5. What are the advantages of owning a Free Zone company?
• 100% foreign ownership
• 100% repatriation of capital and profits
• 100% import and export tax exemptions
• 100% exemption from income and corporate taxes
6. Is VAT applicable for a Free Zone company in the UAE?
According to the UAE law concerning VAT, Free Zone companies must undergo a VAT registration process once their annual income exceeds 350,000. At this point, they are eligible to register under the group VAT system. In Free Zones, businesses may transfer any goods within these designated tax-free zones.