Owning a company in Dubai seems like a passport to the Elysian Fields of freedom to many. Freedom from taxes, freedom to trade anywhere. If you also visualize Utopia when it comes to doing business in Dubai, then let me enlighten you up that you are partly correct and partly incorrect.
The carte blanche given to the foreign entrepreneurs to do business inside as well as outside the UAE by the mainland jurisdiction seems no less than a quid pro quo for their obligation that 51 per cent of the equity of the entity’s onshore business must be held at all times by one or more UAE nationals. Thanks to the borderless economy and free trade zones! You can start a company in Dubai or any other part of the UAE without sacrificing your 51% ownership.
In the UAE, a company can be established either in Mainland, Free Zone or Offshore. All these regions come under different jurisdictions or licensing authorities: Emirate-specific Department of Economic Development, Free Zone Authority and Offshore Authority respectively.
Planning to incorporate a mainland company in Dubai, economic capital and the second-wealthiest emirate of the UAE, but sitting on the fence whether to trade off your 51% shareholding with the borderless trade liberties? You are not alone. Although the latest reforms in the UAE trade laws break the good news to foreigners that they are now permitted to set up companies in the mainland territories of the UAE with 100 percent ownership, not every business activity is eligible for the same. Therefore, if you are performing business activities that don’t qualify for complete ownership in the mainland area, it’s time to change your route to free trade zones. Keep reading to know more about the advantages that free zone companies bring at your disposal.
What is the free zone concept?
Also known as a foreign-trade zone (formerly free port), a free zone is a region within which goods may be landed, handled, manufactured or reconfigured, and reexported without the intervention of the customs authorities. Only when the goods are moved to consumers within the country in which the zone is located do they become subject to the prevailing customs duties. Configured around major seaports, international airports and national frontiers, free trade zones offer many geographic advantages along with myriad other benefits including various tax exemptions.
How many free zones are there in the UAE?
You may find about 53 free zones across seven emirates of the UAE, of which 28 are housed by Dubai itself. The names are listed below:
Free Zones in Dubai
- Dubai Airport Free Zone
- Dubai Auto Zone
- Dubai Cars and Automotive Zone
- Dubai Design District
- Dubai Flower Centre
- Dubai Gold and Diamond Park
- Dubai Healthcare City
- Dubai Industrial City
- Dubai International Academic City
- Dubai International Financial Centre
- Dubai Internet City
- Dubai Knowledge Park
- Dubai Logistics City
- Dubai Maritime City Authority
- Dubai Media City
- Dubai Multi Commodities Centre
- Dubai Outsource Zone
- Dubai Science Park
- Dubai Silicon Oasis
- Dubai Studio City
- Dubai Techno Park (New name: National Industries Complex)
- Dubai Textile City
- Energy and Environment Park
- International Humanitarian City
- Jebel Ali Free Zone Authority
- Jumeirah Lakes Towers Free Zone
- Dubai Production City
- Virtual Commercial City
- Free Zones in Abu Dhabi
- Abu Dhabi Airport Business City
- Abu Dhabi Global Market
- Abu Dhabi Ports Company
- Higher corporation for specialized economic zones/ ZonesCorp
- Industrial City of Abu Dhabi
- Masdar City
Free Zones in Sharjah
- Hamriya Free Zone Authority
- Sharjah Airport Free Zone Authority
- USA Regional Trade Center Free Zone
- Sharjah Publishing City Free Zone
- Sharjah Media City Free Zone (Shams)
- Sharjah Publishing City Free Zone (SPC Free Zone)
Free Zones in Fujairah
Free Zones in Ajman
Free Zones in Ras Al Khaimah
- RAK Investment Authority Free Zone
- RAK Maritime City
- Ras Al Khaimah Free Trade Zone
- Ras Al Khaimah Media Free Zone
Free Zone in Umm Al Quwain
Why should I do business in Free Zone in the UAE?
It’s not your country, but it’s your business, your effort, your money and your time! Desiring 100% ownership of your business is not at all asking for too much. But every country has its own set of rules and regulations when it comes to allowing foreign nationals to do business on their land, for all good reasons. Foreign entities in the UAE can do business under four types of licences i.e., professional licence, commercial licence, industrial licence and tourism licence. In the light of recent reform in the Commercial Company Law, you sure can enjoy full ownership with an onshore or LLC company in the UAE, but only when your business is operating under a professional licence. For instance, under a professional license, you may own 100% shares by appointing a UAE national as a Local Service Agent unlike commercial & industrial licenses that let you own only 49% shares of your company giving the lion’s share to a UAE National or two. Considering any of the free zones (FTZs) for your business registration in Dubai, UAE helps you overcome the situation while bringing a cartload of incentives such as:
- 100% foreign ownership of the businesses. Government ownership is not disrupted. The matter of possession is totally in the hands of investors.
- 100% cent import and export tax/tariff/duty exemptions
- 100% repatriation of capital and profits
- Zero currency restrictions
- Naught personal income taxes
- Corporate tax exemption for 15 years, renewable for an additional 15 years
- Outstanding communication and infrastructure
- Hassle-free and efficient immigration procedures save huge time
- Simplified process of company formation
- Promptly available workspaces, including warehouses
- Companies within free zones are not subject to duty-free shopping
- A free zone entity can be run independently by any foreign investor.
- Confidentiality is assured throughout the operation.
- A range of different activities is available to investors, including owning property. Bank accounts can be opened easily for them.
- Employees, workers, other support staff, and the housing facilities in the company located in a free zone can get visas without any problems.
What are the disadvantages of UAE Free Zone companies?
Mainland jurisdiction provides business persons free rein to grow their presence within the nation and worldwide, but the entity has to give 51% ownership to an Emirati national. On the other hand, free zone jurisdiction allows the foreign entity to relish the full ownership of their company. But you can’t have your cake and eat it too. UAE free zones, without a doubt, are excellent for SMEs and start-ups. But still, most business persons feel torn between the free zone and the mainland for the establishment of their company. Both the regions have their own pros and cons. If 100% ownership with no UAE national shareholding and various tax exclusions offered by free zones lure you more, you may choose to do business in a free zone. But before you go bananas over establishing a company in any of the free zones in the UAE after knowing just the benefits of a free zone company, allow us to enlighten you about some disadvantages of commencing your business in a free zone in the UAE. Here are they:
- Unlike mainland corporations that can trade with no holds barred, business entities registered in the UAE free zones can only operate within the free zone boundaries and are generally restricted to performing only those activities that are listed in their licence(s).
- Every company registered in the free zone is obligated to lease minimum office space within that particular free zone area. The free zone entities are permitted to acquire UAE residence visas for the director, shareholder as well as employees of the company through the free zone where they are registered.
- Paddling their own canoe, free zone jurisdictions in the UAE restrict the entities registered with them to trade directly with the UAE local market but through a local distributor (if they wish to). Such companies are subject to pay a 5% duty for selling goods or services in the UAE local market.
- Free zone registered companies also have to accept certain restrictions associated with the type of business activity. They are permitted to perform only activity or group of business activities that are approved under their business licence provided by the particular jurisdiction.
- Employees holding a free zone company visa has to pursue the work within the boundaries of the free zone.
- Compared to the mainland, the notarisation and translation expenses pertaining to the free zone are an expensive affair.
Need Dubai free zone company formation help?
Blowing hot and cold about setting up your business in Dubai free zone? The trade restrictions in free zone do not affect business persons’ elated spirits because they get so many other perks of establishing a free zone company apart from 100% ownership. So now you know why so many entrepreneurs ditch mainland and choose a free zone for their company formation, we leave you to your own devices. Take stock of your preferences and business needs and choose one mindfully. For any kind of advisory assistance in setting up your business in the UAE free zone, you may get in touch with us by clicking here. Our business setup consultancy also assists in mainland business incorporation and offshore company formation in Dubai, UAE. Not only that, but you may also approach our qualified and experienced Dubai business advisors if you’re seeking professional help in managing your business financials & accounts, return/refund filing and taxation. Our business specialists also aid business persons expand, relocate or scale up their existing businesses in Dubai, UAE and not to mention in winding up the operations. In a nutshell, you can freely count on Adam Global, Dubai if you are facing any difficulties or challenges while running your business in Dubai.