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Freezone Company Formation

Main Aspects of Company Formation in Dubai and UAE Free Zones

Page content

  1. What is a free zone, and what does it look like on the territory of the UAE?
  2. Main Aspects of Company Formation in Dubai and UAE Free Zones
  3. What are the advantages and main features of freezone legal entities
  4. What are companies in free zones, and what types of onshore firms exist in the UAE?
  5. In which case does one need a company in the free zone, and in which case – not?
  6. What types of licenses do free zones provide?
  7. What is the difference between a company in a free zone and companies in the main territory of the UAE?
  8. What support and assistance do authorities in the free zones provide?
  9. Data Privacy of Entrepreneurs in Free Zones
  10. What are Mandatory Requirements for a legal entity setup in Dubai free zone?
  11. Business incorporation in Dubai free zone. How much does it cost?
  12. How to get advice on company formation in the UAE free zone?
  13. Questions and Answers about Freezone Company Formation in Dubai and UAE

What is a free zone, and what does it look like on the territory of the UAE?

A United Arab Emirates Free Trade Zone (FTZ) is a special area in the territory of the country that has its own rules and procedures which apply to local entrepreneurs. There are almost no restrictions for foreigners, and 100% foreign ownership of a business is allowed. In addition, all bureaucratic and organizational procedures are greatly simplified here. The environment for any enterprise in the free zone is tax-free.

Small startups and small trading enterprises, as well as large industrial corporations and concerns, eagerly register in this country due to the numerous advantages in local FTZs. Such giants as ASUS, BENQ, DHL, FedEx, RedBull, Rolls-Royce, for instance, have registered their companies in the DAFZA free zone.

Now there are about 40 free zones throughout the country. Over time, more and more new zones emerge. Thus, several free zones have appeared almost at once over the past few years: Building Material Zone, Dubai Energy City, and Dubai Aid City.

Here is the list of the main advantages and disadvantages that entrepreneurs get after completing a Dubai freezone company formation process.

Advantages of entrepreneurship in FTZs of the United Arab Emirates:

  • A complete absence of corporate taxes;
  • A quick registration, minimal bureaucracy;
  • 100% ownership of a legal entity;
  • No restrictions on the withdrawal of capital abroad;
  • Developed infrastructure throughout the country;
  • Security and predictability of jurisdiction;
  • Low operating costs (compared to other countries);
  • Protection of personal information.

Disadvantages/restrictions of entrepreneurship in free zones of the United Arab Emirates:

  • Restriction on working in the domestic market (as opposed to a local firm).
  • High price of registration and expenses for doing business (compared to offshore ones in the country).
  • More stringent reporting and auditing requirements (compared to offshore ones in the country).
  • Necessity to pay VAT (as opposed to an offshore one).

In addition, each of the FTZs has its own characteristics that distinguish it from other jurisdictions, for example, its proximity to the airport or port, access to free land for construction, presence of a sufficient number of necessary specialists.

Table – Main Features and Advantages of Some of Free Zones

UAQ FTZ
(Umm Al Quwain)

KIZAD free zone
(Abu Dhabi)

SAIF free zone
(Sharjah)

TwoFourFiftyFour freezone

  • Strategic location with access to the market of the Emirate of Umm al-Quwain;
  • Proximity to two international airports and major seaports;
  • Special benefits at UAQ seaport.
  • Large plots of land for building construction;
  • Proximity to local power plants;
  • Excellent solution for the arrangement of industrial production.
  • Located at Sharjah Airport;
  • Registration fees are lower than in Abu Dhabi or Dubai.
  • Access to the Media Vocational Training Academy, which offers special courses;
  • Access to specialized movie shooting sites;
  • Ability to get a 30% discount on production from the Abu Dhabi Film Commission.

What are companies in free zones, and what types of onshore firms exist in the UAE?

A firm in the United Arab Emirates free zone, or an onshore company, is a special type of organization that has a number of advantages for foreign investors. You can register the following types of companies in the free zones of the United Arab Emirates:

  • FreeZone Establishment (FZE) – an onshore legal entity with one shareholder, a separate organization, a resident of the country. Such an enterprise can conduct any activities in its free zone or in other countries.
  • FreeZone Company (FZ-LLC) – an onshore legal entity with several shareholders, a separate organization, a resident of the country. Such a firm can conduct any activities in its free zone or in other countries.
  • Branch office – a subsidiary that is part of the parent legal entity, a resident of the United Arab Emirates. It can only conduct such activities as provided for in the charter of the parent enterprise.
  • An offshore company – a separate legal entity that is not a resident of the United Arab Emirates but can conduct any activities outside its jurisdiction.
  • Special varieties of companies in free zones. In addition to the above mentioned, some jurisdictions have their own special types of firms, for example, Restricted Purposes Company (RA) in RAK ICC. This is a legal entity intended for use as a special-purpose tool; that is, such an organization has the right to conduct only those tasks that are prescribed in its charter. This protects a firm from unauthorized actions and fraudulent schemes.

In which case does one need a company in the free zone, and in which case – not?

As a rule, company formation in free zones is considered by those who plan to operate in foreign markets. If your goal is the domestic market of the United Arab Emirates and GCC countries, it is better to register a firm in the main territory of the country. Depending on the goals and tasks of your enterprise, you can choose the best form of a legal entity in the United Arab Emirates.

Table – Choosing the type of company depending on commercial tasks

 

Legal entity in the main territory

Legal entity in the free zone

Offshore company in the free zone

Best solution

For operations in the domestic market of the United Arab Emirates and GCC countries

For operations within the free zone and at the international level

For operations outside the United Arab Emirates

What types of licenses do free zones provide?

Each free zone in the country either has its own specialization (medicine, finance, hi-tech, cars, etc.) or does not have a specific specialization and registers trade, industrial, service, and other enterprises. Any legal entity that is registered in the FTZ must obtain a license for certain activities in this jurisdiction. Here is the list of the main types of licenses that are issued in free zones of the United Arab Emirates:

  • A commercial license allows you to trade with groups of goods stated in the document, or any kind of goods (general trade license).
  • Service license. This document gives you the right to provide consulting in legal and marketing services, audit services, medical, and educational services.
  • Industrial license. This type of license gives you the right to produce goods in a free zone. In most cases, only environmental restrictions apply here – production should not have a negative impact on local ecosystems.

What is the difference between a company in a free zone and companies in the main territory of the UAE?

The main difference between firms in FTZs and enterprises in the main territory of the United Arab Emirates is the opportunities and restrictions of each type. Organizations in the FTZ can conduct commercial activities in their jurisdiction, as well as in other countries of the world. They cannot work directly in the rest of the United Arab Emirates (only through local intermediaries). Firms in the main territory of the United Arab Emirates do not have such restrictions in the domestic market, but a foreigner can own no more than 49% of the shares of such a firm. The remaining 51% should belong to the local individual or legal entity (although the profit can be distributed in any proportion according to the supplementary agreement).

What support and assistance do authorities in the free zones provide?

The United Arab Emirates as a whole and each of its free zones, in particular, are focused on attracting foreign investment and developing an enterprise in the region. Therefore, they make every possible effort to attract as many investors as possible, providing them with comprehensive support and assistance in the process of registering and starting an enterprise. Each free zone has its own website and customer service center. You can contact a representative of this jurisdiction on any matter of interest to you.

In addition, in some of the FTZs, various events for investors are held, for example, training webinars from DMCC or JAFZA forums.

Some of the free zones have their representative offices outside the United Arab Emirates, for example, in DIFC and RAKEZ.

Data Privacy of Entrepreneurs in Free Zones

Based on the criterion of openness of data on entrepreneurs, jurisdictions can be divided into two types – with an open registry and closed registry. The open registry provides information on the ultimate beneficiaries of a registered legal entity to anyone who wishes, as a rule, this information is available on the website of the relevant zone. Data from the closed register is disclosed only to a limited circle of people, including law enforcement agencies and tax services, and only upon special request. In the vast majority of free zones in the United Arab Emirates, there are closed registers of entrepreneurs, which means you can count on the complete confidentiality of your data when choosing the Dubai freezone company setup.

Each free zone is a separate jurisdiction with its own rules and requirements for entrepreneurs who want to register their firms. These requirements can be found on the website of the corresponding zone. In any zone, there are a number of mandatory requirements, including providing complete information about shareholders and a director of a future firm, information on the nature of your activities, the charter/memorandum of a firm, and, if necessary, other documents that form a starting package. In addition, a firm in the FTZ is required to obtain a license for its commercial activities (a specific type of activity should be provided for by the rules of the free zone).

Business incorporation in Dubai free zone. How much does it cost?

The Dubai freezone company setup cost includes state registration fees (paid once) and the price for a license (paid once a year when renewed). Resident visas for an investor are paid for separately.

Depending on the specific jurisdiction, the freezone company formation fee ranges from about 4,500 dirhams to about 30,000 dirhams. The price for a license depends on the specific area and type of commercial activities. In the simplest case, a general trade license fee ranges from 17,000 dirhams to about 50,000 dirhams.

When calculating the freezone company setup cost, it is important to remember that in many free zones (not all of them), there are minimum capital requirements from symbolic 1000 AEDs to impressive 300,000 AEDs in Umm Al Quwain FTZ. Some free zones require the payment of a charter capital into a bank account, while others do not. All relevant information on this subject can be obtained on the free zone website or from your consultant.

How to get advice on company formation in the UAE free zone?

Any foreigner can go through the whole process of company setup in Dubai freezone (or any other Emirate) independently, but it will be much faster and more efficient to use the services of a consulting firm. As a matter of practice, it looks like this: you contact one of the consulting firms in the United Arab Emirates (do not forget to check the licenses and certificates of the selected firm first) and describe what kind of activities you plan to conduct in the United Arab Emirates and how. Further, consultants help you choose the best FTZ for your goals, and then act as an intermediary between you and the authorities of the chosen jurisdiction, taking all necessary steps to register and start an organization. After that, a consulting service may continue communicating with the local authorities on your behalf. Assistance in opening a bank account, obtaining a license, and visa is also included in the list of services of local consulting providers.

Questions and Answers about Freezone Company Formation in Dubai and UAE:

  • How much does a consultation cost?

    An initial consultation is free. You will get a basic idea of what opportunities you have in the United Arab Emirates and will be able yo decide if you want to set up a firm here.
  • How to save money on company formation in FTZs?

    Our consultants will help you choose the best option for you in terms of the "price-opportunity" ratio. You pay a minimum and get the maximum for your money. You will receive a guaranteed solution for you.
  • Can a company in a free zone conduct any activities in the United Arab Emirates?

    An enterprise in a free zone may conduct commercial activities in the territory of the free zone. You can conduct commercial activities outside the FTZ in the United Arab Emirates only through local intermediaries and partners.
  • What free zone to choose?

    The choice of the best jurisdiction depends on various factors such as access to infrastructure facilities (ports, airports, warehouses, free land for development, etc.), access to labor and other resources (in Dubai there are more, in other Emirates less), desired level of expenses (Dubai freezone company formation is, as a rule, more expensive, compared to other Emirates). To choose the best solution, you need to consider all the factors that matter specifically for your enterprise.
  • How to speed up the process of company formation in Dubai freezone?

    Depending on the nature of your activities and a specific free zone, the whole process takes from 6 to 35 days. But this is only if you know exactly what needs to be done and where to go. The best solution, in this case, is to use the services of consulting firms, as they have the necessary experience and proven schemes.
  • What is the cheapest way of free zone company formation?

    There is no single answer to this question. As a rule, a lower price is associated with limited opportunities in terms of infrastructure, markets, etc. Here it is more appropriate to talk about the minimum fee for your particular case. It is better to use the services of a specialist to determine this.
  • What if a company in the FTZ is no longer required?

    In this case, it would be best to close your organization. If you do not renew the license, it will be automatically canceled, but your enterprise will still exist, it may be charged fines, for example, from your bank, so it’s better to take care to close your company. This way, you will protect yourself from potential problems. If the termination of your activities is temporary, in some of the zones, for example, in the DMCC, you can suspend your license and fire employees without closing your firm – get the status of a “Dormant enterprise.”
  • Is it possible to transfer a company from one free zone to another?

    Redomiciliation of onshore legal entities in the United Arab Emirates is not permitted. Therefore, you need to choose the right jurisdiction that is best for you at the very beginning.
  • What are the most popular free zones in the United Arab Emirates?

    Obviously, the most popular free zones are those where the majority of the firms are registered. Among the most popular, one can distinguish the following JAFZA, DAFZA, DMCC (Dubai), RAKFTZ (Ras al-Khaimah), ADAFZ (Abu Dhabi).
  • How long does it take to set up a company in Dubai free zone?

    It depends on the specific free zone and the nature of your commercial activities. An ordinary trading firm will be registered from 6 to 15 days, while it may take up to 40 days for the creation of industrial, financial, or medical enterprise.
  • Do I need to fly to the Emirates to set up a company in a free zone, or can I do everything remotely?

    With the help of a consulting enterprise, you can perform all operations remotely. It will be necessary to come to the United Arab Emirates only once to sign documents.

List of Free Zones in the United Arab Emirates

Freezone Company Formation

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