A Free Zone license serves as the essential authorization for conducting business activities within our designated free zone area. This license provides businesses of varying scales, encompassing startups, small and medium enterprises (SMEs), as well as major multinational corporations, with a range of advantages for establishing their operations in Dubai’s free zone.
Benefits of Forming Freezone Companies in UAE
Setting up a business in a free zone in the UAE offers a multitude of benefits that make it an attractive option for entrepreneurs and investors. Some of the key advantages include:
- 100% Foreign Ownership: Unlike in the mainland UAE where local sponsors are often required, free zones allow foreign investors to retain complete ownership without the need for a local partner.
- Tax Exemptions: Businesses established in free zones typically benefit from complete or substantial tax exemptions, including exemptions from corporate income tax, personal income tax, import and export duties, and value-added tax (VAT).
- Simplified Licensing and Registration Processes: Free zones are known for their streamlined and efficient licensing and registration processes, minimizing bureaucratic red tape and allowing for a quick setup.
- Wide Range of Business Activities Allowed: Free zones cater to a diverse range of industries and business activities, offering flexibility in choosing the type of business to establish.
- Access to Modern Infrastructure and Facilities: Free zones boast state-of-the-art infrastructure, modern facilities, and advanced amenities designed to meet the needs of various industries, enhancing operational efficiency.
- Proximity to Global Markets: Free zones are strategically located near ports, airports, and major transportation hubs, enabling easy access to international markets and global trade routes.
- Complete Repatriation of Capital and Profits: Businesses in free zones are eligible for full repatriation benefits, allowing for the transfer of capital and profits out of the country.
- Autonomous Legal Framework: Free zone companies operate under independent laws and regulations, providing a conducive environment for business operations.
- Customs Duty Waivers: Free zones offer a complete waiver from customs duties, promoting international trade and reducing operational costs.
- Global Market Reach: Establishing a business in a free zone allows for effortless access to regional and international markets, facilitating business expansion and growth.
These benefits collectively create a business-friendly environment in free zones, making them an ideal choice for companies looking to establish a presence in the UAE and leverage the strategic advantages offered by these specialized economic zones.
Companies in UAE: An Overview
The UAE government has been working hard in the past few decades to attract more foreign investors and creditors. Bringing in such investment also helps the government improve and transform the local economy. One of the most popular choices available to such investors has been company incorporation in Dubai Free Zones. Visionary policies, business-friendly laws and the entrepreneurial potential of the UAE have all been drivers of this rise in popularity. The three main business types or jurisdiction found in the UAE are as follows;
- Mainland Companies
- Free Zone Companies
- Offshore Companies
Like with all options, all three of these offer various benefits and compliance requirements. In this article, we will take a more in-depth look at the advantages and disadvantages of free zone companies in Dubai.
Free Zones Companies in the UAE
Free zones are essentially Special Economic Zones or regions in the UAE that provide trading and business licenses to companies. These zones attract investors to set up business establishments by offering tax benefits and other incentives. Throughout the seven Emirates, there are over forty different Free Zones. The regulatory authority that exercises jurisdiction over a Free Zone is known as a Free Zone Authority or FZA. The FZA is responsible for monitoring and regulating the activities that occur within the zone, and is the body that issues licenses to operations. Businesses can choose from between the three options below when it comes to company incorporation in Dubai Free Zones;
- Free Zone Company
- Free Zone Establishment
- Branch of a Business
The significant costs associated with setting up Free Zone companies in the UAE are as follows;
- Trade Name Reservation and Registration: Before incorporating a company in the UAE, business owners need to reserve a trade name and register it with the relevant authorities. This process can involve fees, which vary depending on the emirate and the type of company.
- Registration or Incorporation of the Company: The next step involves registering or incorporating the company. This process also incurs fees, which can depend on the type of company, share capital, and the number of shareholders.
- Trade License Application: After incorporating the company, business owners need to apply for a trade license to operate in the UAE. The cost of obtaining a trade license can vary based on the company’s activities, location, and other factors.
- Office Rental and Staffing: Setting up a physical presence in the UAE requires renting an office space, which can also come with significant costs. Additionally, hiring employees to staff the office and run the business can add to the expenses.
- Visas and other ancillary costs: Business owners and their employees may require visas to work and reside in the UAE. The costs associated with obtaining visas can vary based on the type of visa, duration, and other factors. There may also be other ancillary costs, such as legal fees, accounting fees, and other expenses related to operating a business in the UAE.
Disadvantages of Free Zone Companies in Dubai
- Restriction when it comes to trading in the UAE mainland as Free Zone companies cannot trade directly with the local market in the UAE.
- Free Zone companies in the UAE will have to take the help of local distributors if they wish to trade within the Emirati market.
- Must pay a 5% duty if they wish to trade with the local market in the UAE.
- Restrictions on certain business activities as each Free Zone is assigned various activities depending on its resources and location.
- Limit on the freedom a business has to perform an activity
- Restrictions on the work location as companies have to stay within the boundaries of the Free zone.
- More costly to set-up when compared to the Mainland company incorporation.
The Permitted Activities in Free Zones in UAE
The permitted activities in free zones in the UAE vary depending on the specific free zone and its regulations. However, some common activities allowed in UAE free zones include:
- Advertising
- Supermarket and transport services
- Shipping and storage services
- Consultancy services
- Trading activities
- Event management
- Film, art, and video production
- Manufacturing and processing of raw goods
- IT services
- Education and training services
- Music production and recording
- Publishing of directories, guides, and online content
- Legal consultancy
- Human resource consultancy
- Lifestyle consultancy
- Investment consultancy
- Radio broadcasting
- TV broadcasting
- Web streaming
- Tourism services
- Law firm services
- Industrial activities
- E-commerce
- Public relations
- Research services
- Music promotion and management
- New media activities
These activities represent a diverse range of sectors and industries that businesses can engage in within the free zones of the UAE, offering flexibility and opportunities for various types of enterprises to thrive and operate successfully.
How KGRN Can Help
KGRN Chartered Accountants offer one of the best Free Zone incorporation services in the UAE. Our experts have decades’ worth of experience in the field of business incorporation and consultancy. We have helped countless businesses start the company of their dreams in Free Zones throughout Dubai. Our legal experts will also be able to help you decide on what type of business structure to incorporate as.
Additionally, we can file an application for incorporation on your behalf and help you every step along the way. Our experts will also gauge what licenses and certificates you will need based on the nature of your operations. The team of accountants who work with us can also help you maintain compliance at all times, and manage your taxes efficiently. So, what are you waiting for? Contact us Today for Build the company of your dreams with KGRN by your side!
