Starting a business in a country with a flourishing economy is what most entrepreneurs are looking forward to. Emirates such as Dubai are offering a wide range of investment opportunities. Among these, we can mention the free zones and their advantages for commercial activity. However, before analyzing the benefits of a free zone company formation, there are several things you must consider.
In this article, you will learn everything about the benefits a free zone company offers in Dubai. Let us observe the following aspects:
1. What are the UAE’s free zones?
2. Know the benefits of a free zone company setup in Dubai.
3. What are the primary costs associated with establishing a business in a free zone?
4. What is the difference between a flexi desk and an office for a company startup?
5. Drawbacks associated with UAE free zone jurisdictions
6. Frequent questions
7. How can Connect Group help you?
1. What are the UAE’s free zones?
Free zones are special economic zones or jurisdictions that grant operating licenses to businesses as well as financial and tax exemptions. The seven Emirates have over 40 free zones in total. Thus, the Free Zone Authority is the government body in charge of a Free zone.
Hence, the Free Zone Authority (FZA) is the governing body in charge of key activities related to free zone operations and license issuance. An investor in Dubai FZ can form three types of business entities, which are listed below:
- Company in a free zone (FZC)
- Establishment of a free zone (FZE)
- A division of a corporation
1.1. Some Free Zones in the UAE
Most free zones are focused on the trading, service, and industrial sectors. However, similar to JAFZA, there are free zones in the UAE that cater to specialized industries or sectors. Some examples of such jurisdictions are:
- Dubai Healthcare City (DHCC) is a health and wellness industry development.
- Dubai Internet City (DIC) is a technology industry FZ in Dubai.
- Sharjah Publishing City (SPC) is a center for the printing and publishing industries.
- Dubai Multi Commodities Centre (DMCC) is a trade and commerce center in Dubai.
- Dubai CommerCity is a commercial district in Dubai dedicated to the e-commerce industry.
- Fujairah Creative City is a creative industry hub in Fujairah.
- Dubai International Academic City is a city dedicated to the education industry.
- Dubai Outsource City is a city dedicated to the outsourcing and shared services industries.
1.2. Company structures
In the UAE, there are several company structures to choose from:
- Free Zone Establishment (FZE). Single shareholder
- Single Shareholder Free Zone Company (FZC). There are two or more shareholders
- A foreign company’s branch
- Limited Liability Corporation (LLC)
2. Know the benefits of a Free zone company setup in Dubai
2.1. Full foreign ownership
One of the most obvious advantages of a free zone company setup in the UAE is the possibility of total foreign ownership. This means that the foreign investor does not need to find a UAE national sponsor to form a company.
Hence, the foreigner owns the entire company and does not need a local sponsor. Additionally, foreign ownership is possible regardless of the investor’s nationality.
2.2. Less currency limitations
Currency regulations are restrictions imposed by the government on the exchange of foreign currencies. However, there are no strict currency regulations in the UAE FZ. This means that you can use a variety of approved currencies. As a result, this will make commercial activities easier for you as a foreign entrepreneur.
2.3. Exemption from import/export
Import and export duties are not levied in the UAE’s free zone jurisdictions. This will be a significant cost-cutting measure that will attract import and export businesses. Thus, this aids in the promotion of international trade and the maintenance of relationships with various countries.
2.4. Capital and profits are fully repatriated
The firms are entitled to full repatriation benefits. Profits and financial assets are included. This means that the foreigner can take all of the profits from the business back to his home country. Therefore, this is a really attractive benefit of a free zone company.
2.5. Easier labor recruitment
Companies in the free zones can easily and affordably conduct labor recruitment formalities. They can hire foreign nationals.
2.6. Incorporation of a business is simpler
The procedures for a free zone company setup are straightforward. When compared to other jurisdictions, you can complete the licensing procedures in a matter of days, making the setup process much easier.
2.7. A more accessible immigration process
Immigration facilities linked to UAE Free zones are efficient, saving time. Hence, there are numerous other benefits of a free zone company as well, which include the following:
- Personal or corporate income or gains are exempt from taxation in their entirety
- Corporate tax exemption for 15 years, with an additional 15-year renewal option
- They will not require you to make an initial investment
- Accessing air, rail, and road transportation systems is simple
- There is a ready consumer market in the MENA and Asia regions
- Provision of world-class infrastructure as well as an effective communication system
- Low initial and ongoing costs
Exploring the options that a Free Zone offers businesses can lead to the discovery of new and better growth opportunities for the company. The free zone helps to accelerate business activities and attracts companies looking to invest in entrepreneurial ventures. All these will be great for your free zone company setup.
3. What are the primary costs associated with establishing a business in a free zone?
Often, Free Zones advertise that you can start a free zone company formation for a very low fee. However, the truth is that several mandatory costs quickly add up. Hence, there are five major costs to consider within any Free Zone:
- Reservation of a trade name
- Registration
- Trade permit
- Renting office space
- Visas and other ancillary expenses. For this, Connect Group helps entrepreneurs obtain a Golden Visa and or a Dubai Remote Work Visa.
These are further subdivided into one-time fees and annual fees. Certainly, the registration fees are relatively low. However, once all other costs are taken into account, it is challenging to establish a company in a free zone for less than AED 30,000. This is based on a virtual office arrangement.
3.1. What is the cost of the trade license?
Company trade licenses cost between AED10,000 and AED20,000 per year, depending on the number of activities or services offered. Also, the number of activities typically ranges from 2 to 10, and the Free Zone will provide a list of the permitted activities. Thus, the prices differ slightly between the various free zones.
4. What is the difference between a flexi desk and an office for a company startup?
A flexi desk is the most basic and smallest type of office space within a free zone. It is essentially a shared desk in a communal office space. While this is typically the cheapest lease option, it has a limited number of flexi desks. As a result, many Free Zones will impose a time limit on flexi desk space.
In contrast, an office in a Free Zone is reserved solely for that company and can be customized to meet operational needs. Hence, your visa and legal requirements are one of the most important factors to consider when deciding on a lease type for your business. One Flexi desk is usually good for one or two visas.
Depending on how many visas you need, leasing an office space may be the best value option in the long run. Hence, the AED 30,000 minimum set-up estimate in a Free zone is based on a flexi-desk arrangement. Nevertheless, once you require a physical office and/or more than 1 or 2 visas, costs skyrocket.
Typically, the free zone will charge you per person/per visa for office space. Additionally, it will require you to have between 7-10 square meters per visa against the license.
5. Drawbacks associated with UAE free zone jurisdictions
It is not always about the benefits of a free zone company in the UAE. An investor must also be aware of the limitations. You must know some of the restrictions you may face:
- Restrictions on UAE Mainland trade: Direct trading with the UAE domestic market is strictly prohibited for companies established in UAE Free zone jurisdictions. If companies formed in the UAE free zone want to trade in the UAE market, they must do so through a local distributor. The free zone company must pay a 5% duty when selling goods or commodities in the UAE local market.
- Restriction on business activity: There are also some restrictions based on the type of business activity. Certain business activities or groups of business activities are assigned to UAE-free zones. As a result, the company formed in a specific free zone should carry out the assigned business activity. This translates into a restriction on the freedom to conduct a business.
- Work location restrictions: If an employee holds a Free zone company visa, the employee will need to pursue work within the Free zone’s boundaries.
- Costly formalities: The notarization and translation costs associated with a Free zone are higher than on the Mainland.
6. Frequent questions
6.1. Do I need to open a business bank account?
Before applying for a trade license, most businesses must first open a business bank account. However, some banks may require a copy of the company’s trade license before opening the account. Thus, to avoid this confusing scenario, always seek advice from your preferred Free Zone first.
They will have assisted numerous companies in establishing their businesses and will therefore be able to recommend the most efficient banks. In some cases, you may be able to “soft open” the company bank account with just the initial documents. However, the account will then be fully open once you have the final Trade License.
6.2. Is it necessary for me to show a cash lump sum?
Before you can finalize your free zone company setup, you will need to do something first. You must deposit into a bank account and demonstrate that you have a float of funds. Nonetheless, we can handle all this process for you.
6.3. How much does it cost to use the meeting rooms and how many hours are free?
Most Free Zones have at least one meeting room available for hire at a low cost. Hence, depending on your office lease package, you may be able to use the rooms for free for at least a couple of hours per month. Nevertheless, this is not normally available with a Flexi-desk option.
7. How can Connect Group help you?
For decades, the UAE government has taken a proactive role in attracting foreign investment from around the world. The UAE’s economic progress is largely due to a visionary government, business-friendly policies, and the entrepreneurial zeal of its residents. The tax-related and other financial benefits of a free zone company that the government provides to foreign investors are manifold.
Hence, when it comes to company formation in the UAE, the investors should opt for working with an experienced team. As a result, they will have the expected results in a short time and without any stress. That is why we, Connect Group, are your best option.
Would you like to contact Connect Group to obtain more information on the benefits a free zone company offers in Dubai? If you have any questions, call us on +97143316688. You can email us at contact@connectgroup.co. Then, you will talk to one of our representatives who will answer your questions.
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