Freezone Company Formation

What is a free zone and why should you consider one?

The UAE has long been an attractive destination for entrepreneurs around the world. With low taxes, a strategic location in the heart of the world’s largest and fastest-growing markets, and a government dedicated to promoting and supporting businesses, it’s not hard to see why. But while these are the headline-grabbing factors, there’s another important reason why so many are flocking to the UAE’s shores to practice no-business zones. So what is a free zone?

What is a Free Zone?

Also known as free trade zones Free zones are essentially economic areas where goods and services can be traded, usually at reduced rates of tax and duty. They were originally introduced to boost international business in the region by offering benefits such as 100% foreign ownership of companies. There are currently 45 free trade zones in the UAE.

Over the years, the UAE free zones have evolved to offer ever-greater benefits to the businesses within them. Many free zones cater to specific industries or business types, for example, Dubai Healthcare City serves the healthcare industry, while the JAFZA Free Zone Authority is directly linked to the region’s largest port and is therefore preferred by import and export companies.

So why is establishing a free trade zone such an attractive option and what could it mean for your business?

Why set up in a free zone?

If you want to start a business in the UAE, there are many reasons to choose a free trade zone.

Easy Setup

The setup process in most free zones is incredibly simple. The exact application process depends on your business activity and the free trade zone you choose, but in many cases, you will only need to provide some basic documentation such as copies of your passport and business documents. The entire process often only takes a week or two. Many free zones also offer Flexi desk and virtual packages that allow you to use the free zone’s address and facilities on an ad hoc basis.

Taxes and Duties

This is perhaps the most compelling reason to choose a free zone: the tax system. Founded in a free trade zone, your company not only benefits from 0% corporate and personal tax but is also exempt from VAT, which currently stands at 5%. And that’s not all. Companies in free zones are also exempt from import and export taxes and can trade without currency restrictions.

Foreign Ownership

Another major plus for settling in a free zone is foreign company ownership. Most overseas entrepreneurs wishing to establish themselves in the UAE mainland need to work with a local partner to do business. This is not the case in the free zones of the United Arab Emirates. Set up your business here and you remain 100% owner.

Trade within the UAE

Free zone companies are not allowed to trade directly with the local market in the UAE, however, this is easily overcome. One option is to work with a locally appointed dealer who can market your goods and services for a fee. Alternatively, it is possible to incorporate your free zone company and open branches of your free zone company throughout the Emirates at a later date. These branches can be used to market your offer and conduct business in the UAE mainland.

Support and Assistance

Free Zone authorities stand ready to offer support during setup and beyond. Most free trade zones offer visa application assistance for both shareholders and any applicable dependents such as spouses or domestic workers. Many will also help open corporate bank accounts, advise you on the best bank for your needs and even arrange branch meetings for you. In terms of ongoing business support, it’s not uncommon for free zones to offer business consulting and networking services, as well as access to startup hubs and growth initiatives to help new businesses get started and run.

Privacy: Finally, free trade zones are particularly popular with privacy-conscious entrepreneurs as there is no open register of company owners, and company information such as shareholder data is never released to the public.

What is a free zone and how to set it up in one?

Once, you’re convinced of the benefits of doing business in a Free Zone, you can set up more good news in just five easy steps.

Step one

choose your business. There are hundreds of business activities to choose from and it is possible to select multiple activities under one license. Your business activities will help determine both the cost of your license application and the free zone that best suits your needs.

Step two

Finalize your company name. Deciding on a company name can be a challenge anywhere in the world, but here in the UAE, with its specific rules on naming conventions, it’s a task you should tick off as early as possible. Here are a few things to keep in mind: Offensive language is prohibited, and company names cannot contain religious references or references to well-known organizations (everything from the FBI to the Mafia). As the naming process in the UAE has some other quirks, it is best to work with a company formation specialist who can help you decide on a compliant name and see if it is available for registration.

Step Three

Complete the paperwork and submit your application. A few standard documents are usually required for incorporation in a UAE-free zone: completed application form, copies of shareholder passport, and the like. Some free zones may also require you to submit a business plan. Again, it’s a good idea to work with a company formation specialist at this stage, who can ensure everything is prepared before you submit your application to avoid unnecessary delays.

Step Four

License Notification and Opening a Bank Account. You’ll be notified once your license application has been approved so you can collect your company documents and get to work. With these documents in hand, you can open your corporate bank account and start trading. Your chosen free zone can usually help you find a suitable bank, as can a business incorporation specialist. Alternatively, feel free to contact any financial institution yourself.

Step Five

Visa Processing. The final step in the business formation process is immigration and visa processing. Free Zone authorities or a business incorporation specialist can manage this process on your behalf by assisting you with your application and liaising with the relevant government bodies.

What are the legal structures of a Freezone business setup in the UAE?

 

There are mainly three legal structures of company formation in the UAE Freezone:

  • Free Zone Establishment (FZE) – Sole Establishment / Single Shareholder
  • Free Zone Company or Free Zone Limited Liability Company (FZCO or FZ-LLC) – More than one Shareholder / Multiple Shareholder
  • Branch Office / Representative offices

Free zones connect the region to the world economy through the production of goods for export, foreign exchange, and the opportunity for companies located outside the free zone to trade with international firms.

List Of Free Zones in UAE

AbuDhabi Airport Business City
Ajman Free Zone
Ajman Media City Free Zone
Dubai Media City Free Zone
Dubai Airport Free Zone (DAFZA)
Dubai Multi Commodity Centre (DMCC)
Dubai South
Dubai Gold and Diamond Park
Dubai Silicon Oasis
Dubai Technology Entrepreneur Centre
Dubai World Trade Centre
Dubai Health Care City
Jebel Ali Free Zone Authority
Sharjah Airport International Free Zone
Sharjah Media City Freezone (SHAMS)
Sharjah Publishing City (SPC)
Sharjah Research, Technology & Innovation Park
Hamriyah Free Zone (HFZA)
RAKEZ
RAK Media City
International Free Zone Authority (IFZA)
Fujairah Free Zone
Creative City Free Zone Fujairah
Umm Al Quwain Free Trade Zone (UAQ FTZ)

Free Zone Tax Benefits

The United Arab Emirates Free Zone provides investors and business owners with step-by-step incentives to start their business in the country. The United Arab Emirates has more than 45 successful free zones, offering corporate licenses for various types of activities. Each major free trade area is home to more than 8,000 multinationals from more than 180 countries around the world. Finding the right free zone to do business, depending on your budget and time frame, is a challenge for all investors. Each free zone has a separate licensing body entrusted with granting commercial licenses to investors. These licensing bodies are generally within the scope of UAE law and regulation, but are independent and have separate regulations. Free Zone Enterprises are land enterprises that meet all the requirements for trading or connecting globally and within the UAE, in accordance with the customs laws applicable to goods in transit. As part of the Free Zone Corporate Registration, investors will receive a three-year visa for Investor Residence and will be able to take their employees under the company.

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