The idea behind the creation of “free zones” globally was to build a model which encourages economic activity i.e. provision of key benefits so that entrepreneurs and multinational firms establish and freely conduct their business in free zone. Dubai free zones are the most favorable locations in the Middle East for international operations as they offer complete ownership to a foreign investor, zero taxation and customs privileges.
Unlike mainland’s heavy constitution and operating requirements for businesses such as appointment of UAE national local sponsor – Dubai free zones’ policies and timeframe for new business setup is way lighter and quicker as documentation work and administrative requirements are minimal and there is no need to appoint local service agent to obtain license.
The company setup in the free zone areas is not subject to UAE Commercial Companies Law. Dubai Free Zone Companies are considered to be outside the jurisdiction of UAE, and are operated under the rules and regulations of respective free zone authority.
Classification of Free Zone Companies
- Free Zone Establishment (FZE): This type of company is owned by just one individual or corporate shareholder.
- Free Zone Company (FZCO): This type of company essentially requires at least 2 or more shareholders. Shareholders can be either individuals or corporate companies.
- Branch Office: A company located outside of UAE or in UAE can have a branch in one of the free zones of Dubai.
Dubai houses more than 20 free zones. Each Free Zone registers companies according to its own line of business and each one of them has a different set of requirements, cost and legal structure. Selecting the right jurisdiction depends on short term and long term objective of the business and cost difference.
A Dubai free zone company is allowed to trade internationally and between the free zones without any taxes or duties. However, if a free zone company wants to trade with mainland (Dubai); it will be subject to 5% duty as well as it cannot sell its products within Dubai mainland directly but only through a local distributor or agent.
Advantages of Dubai Free Zone Company
- 100% foreign ownership
- 100% tax exemption on corporate and personal income or gains
- No or very low import/export duty
- 100% repatriation of capitals and profits
- Strategic location for your business
- Don’t get bogged down by mandatory reporting every quarter
- World class infrastructure supporting business activities
- Modern transportation system available for meeting commuting requirements
- Large pool of multinational talent available for recruitment
- Customized and predesigned warehousing and office facilities
- Flexibility to hold properties, participate in multiple activities, and open a bank account in Dubai
- Assistance in housing facilities, staff visas, and other support services
Types of Licenses in Free Zone
There are various incentives that free zones in Dubai provide for license holders such as Dubai Airport Free zone is allowing dual license for its investors. Following types of licenses are offered by free zone authorities for Dubai free zone company setup:
1. Trading License
Trading license allows a business to carry out trade related activities such as import & export, buying & selling of a limited number of commodities.
2. General Trading License
With this license, one can deal with the trading of all types of goods with an exemption on few banned products that require special approvals.
3. Professional License
Individuals or companies who want to offer professional services like consultancy, training, etc. can acquire this license.
4. Industrial License
It is acquired by industrial units to carry out manufacturing, packaging and processing activities.