The UAE has long been an attractive destination for entrepreneurs around the world. Despite the low taxes, the strategic position in the heart of the world’s largest and fastest growing markets, and the government that is committed to nurturing and supporting businesses, this is not at all surprising. However, while these may be the main factors attracting entrepreneurs, there is another big reason why so many people flock to the UAE to do business: the Dubai Free Zones and other parts of the UAE. So the question is, what exactly are the conditions of the Dubai Free Zone (UAE)?
What does free zone mean in Dubai?
What does Free Zone mean?
Free zones, also known as free trade zones, are basically free economic zones where goods and services can generally be traded at preferred tax and customs rates. Their primary goal was to strengthen international business in the region by offering benefits such as 100% foreign ownership of the company. There are currently 45 free zones in Dubai and throughout the UAE.
Over the years, the Dubai Free Zones (UAE) have evolved to offer increasing benefits to in-house businesses. A large number of free zones are reserved for certain types of industries and businesses. Dubai HealthCare City, for example, serves people in the healthcare industry. But the JAFZA Free Zone Authority is directly connected to the region’s largest port. Thus It attracts people active in the field of import / export.
Now the question arises why starting and registering a company in Dubai Free Zone is an attractive option, and what does this situation mean for your business?
Starting a business UAE Free Zone
Why start a business in the Dubai Free Zone?
If you are looking to start a company in the UAE, there are several reasons to choose a free zone.
Easy to set up
The start-up process is surprisingly simple and straightforward in most of Dubai Free Zones. The exact time of processing the application depends on the type of business activity and free zone you choose. But in most cases, just a few basic documents, such as a copy of your passport and business documents, are enough. The whole process usually takes only one or two weeks. Most free zones also offer virtual packages that allow you to use the free zone address and facilities if needed.
Taxes and Liabilities
The tax system is probably the most compelling reason to choose Dubai Free Zones. Start your own business idea in Dubai region or other parts of the country. So that in addition to benefiting from 0% corporate tax and personal tax, you are also exempt from VAT – which is currently 5%.
From this date, a 9% tax will be calculated for companies in the UAE Free Zones that do business in Dubai and enjoy the commercial benefits of the main areas. Income up to 375,000 dirhams will be tax-free, but for income above 375,000 dirhams, 9% tax will be levied. Tax rates will vary for certain multinational corporations (with global revenues of more than € 750 million – or AED 3.15 billion – and other conditions).
Salaries and other personal income will be tax-exempt. It has been determined that the company will not be taxed on the salaries and other job income of individuals (whether received from the public or private sector).
Free Zone vs. Mainland
Another great advantage of starting a business in Dubai Free Zones is the possibility of foreign ownership of the company. Most foreign entrepreneurs who want to start a business in the UAE main area have to work with a local partner to do their business. This is not the case in the UAE Free Zones – start your own business a free zone and own 100% Foreign ownership.
Deal from within the UAE
Dubai Free Zone businesses and other UAEs are not allowed to trade directly with the UAE’s local market, however this problem is easily solved. One option is to partner with a specific local distributor to bring your goods and services to market for a fee. Another way is to start your own business in the free zone and later open branches of your free zone company in the main areas of the UAE. These branches can be use to market your services and do business from within the main area.
Support and Assistance
The Emirates Free Zones Authorities are ready to assist you during and after the start-up process. Most free zones have open policies when applying for visas for shareholders and other dependents such as their spouse or crew, and try to facilitate the process of issuing visas to family members, etc.
Many of these zones also help shareholders in opening company corporate accounts, advising the most appropriate bank for their needs, and even holding branch meetings. It is quite common to provide ongoing business support, business consulting and networking services, as well as access to startup centers and growth plans to help start-ups in free zones.
Finally, we must say that free zones are especially popular among entrepreneurs who are sensitive to their privacy. Because there is no open list of company ownership, and company information such as shareholder details is never disclosed to the public.
Key steps to start a business in the UAE Free Zones
It is easier to start a business in the UAE-Dubai Free Zone than in the main areas. Free zone offices require the least paperwork and formalities and have the least waiting time. Here are the key steps to starting a business in the Free Trade Zone of Dubai (UAE).
How to start a business in Dubai Free Zones?
Determine the type of legal institution
Determine which type of legal entity your business is. In the UAE Free Zone, you can start one of the following two company models:
- Free Zone Limited Liability Company (FZ LLC) or Free Zone Company (FZ Co)
- Free Zone Establishment (FZE)
The difference between the two models is in the number of shareholders and whether the shareholder is a natural (private) or legal person. Not all free zones may register both models of the company. To know the model of a registrable company, you should refer to the special offices of the Dubai Free Zones (UAE).
In the free zone of Dubai Airport, you can form a .FZ Co. with a share capital of at least 1000 dirhams. The value of each share must be 1000 dirhams.
At Dubai Multi Commodities Centre (DMCC), the minimum share capital to form a free zone company in the UAE is 50,000 dirhams per company and 10,000 dirhams per shareholder. In order for a company to receive a public trading license, it must have a share capital of at least 1 million dirhams.
Select a trade name
You need to choose a brand or trade namewhen deciding on the type of legal entity for your business.
In most cases, you should contact the relevant Dubai Free Zones office or the relevant economic development department regarding the authorized brand and whether the brand name has already been registered.
In general, in order for the Department of Economic Development to approve a proposed brand, the brand must have the following characteristics:
- It should not be contrary to the social ethics or public order of the country
- The legal form of the company should come after the brand, for example LLC, FZE, DMCC, etc.
- Not registered before
- Be consistent with the legal situation and the desired activity model
- Does not include the name of any religion, government or letters or symbols of external organs of the body
Apply for a business license
The model of business license you apply for depends on the initial and core business of your business.
At DMCC you can choose from over 600 business activities from more than 20 sectors such as energy, commodities, gold and diamonds, technology, construction, consumer goods, healthcare, flight, shipping, training, media, professional services, financial, personal and social services, etc.
At DIFC you can do financial or non-financial business. Financial businesses include:
- wealth management
- capital markets
Non-financial businesses include:
- retail stores
- five-star hotels
- art galleries
- academic institutions
Selection of office space
You can buy or rent office space in the Dubai Free Zones. Office requirements depend on the number of employees and the business model of your company.
At DMCC, you can choose from three options:
- 20-30 square meter flexi desk
- 200-265 square meter flexi office
- multi-storey offices with a total area of 2,000 square meters
Obtaining pre-approvals, business register and obtaining a license
The rules governing companies established in the Dubai and UAE Free Zones are determined by the respective Free Zones. To obtain the necessary approvals, you must apply for registration with the necessary documents. The list of documents varies depending on the business model, the company model, and the free zone management requirements.
First, you need initial approval. You are require to provide a completed application form, business plan, copy of license, copy of passport, sample signature of the shareholder / shareholders of the company, etc.
After obtaining initial approval, you must pay the registration and licensing fees. The final amount depends on the license model required.
After registering documents such as the completed application form for registration, stock capital information, articles of association and summary of the agreement (notarized and approved), etc., you must go through the licensing and visa processing steps.
For more information on registering a company in Dubai and starting operations in the Dubai Free Zone or other parts of the UAE, contact Coverdale experts. You can also share your experiences of working and starting a business in the Free Zones of Dubai (UAE) with us and the users of the website.