Company formation in Abu Dhabi, Dubai and the rest of the UAE can be a complex task for expats. Over the past few years many free zones have opened up to help businesses establish themselves easily in the UAE.
Free zones are designated areas created around one or more commercial categories that issue licences to companies in those categories. They are governed by their own regulations and offer an alternative to mainland company setup.
There are more than 40 free zones in the UAE, each catering to different industries and sectors and each offering unique infrastructures and support.
The industry in which your company operates will generally dictate the free zone which is most appropriate for you. Each free zone generally focuses on one particular industry. For example, Dubai International Financial Centre (DIFC) is centred around banking and financial services, while Dubai Internet City (DIC) is home to companies in the internet and communications technology industry. This is beneficial because it promotes collaboration between companies within the same free zone as well as the exchange of services and support.
When deciding which free zone is best for your business It is important to first do your research to find out if the free zone you are considering is a good fit.
There are numerous benefits to setting up a business in a free zone but potentially the biggest is that there is no requirement for a local partner, which means that you can retain 100% ownership of your business. However, there are some negatives too. Many government organisations and some companies will not do business with free zone companies and choose to work only with onshore companies. Additionally, in the event of any dispute or contractual issue with an onshore client, you could encounter the issue of counterparty default. This means that free zones are very favourable for some companies but not a good fit for others. Other notable benefits of free zone company set up are:
Free zones are also very inclusive and will organise training and networking events and encourage member companies to collaborate and share business opportunities.
No, with a free zone company you are only permitted to carry out business within the jurisdiction of the free zone itself or outside of the UAE. If it is your intention to do business on the mainland of the UAE, you will need to establish an onshore company.
When setting up within any free zone, the costs can be divided into five main categories, some of which are one-off expenses and others annual fees. These are:
With all expenses taken into account, setup costs will generally start from around AED30,000 (assuming a virtual office arrangement).
The price of the trade licence is dependent on the number of services which you wish to provide. Generally, trade licences have between 2 and 10 activities and the annual fee will range from AED10,000 and AED20,000. The prices are very comparable from one free zone to another, and each free zone can provide a list of all the permitted activities.
There are three types of entities that can be established in most free zones. These are:
The main consideration with a branch is that taxes must be paid in the parent company’s jurisdiction.
In some free zones there is no capital requirement for incorporation. However, in others you will have to deposit a sum in a bank account as proof of funds in order to set up. You should contact the free zone for the specific requirements as each one will differ.
Most free zones will require that you rent a physical office space. However, in many cases they will have options to rent a flexi-desk. This is a shared desk in a communal office space and is generally the cheapest available option.
When choosing between a dedicated office or a flexi-desk arrangement it is important to consider the visa requirements for your business, since only one or two visas are permissible with a flexi-desk arrangement and the size of the office space will dictate how many visas can be allocated. You are generally required to have 7-10 square metres per visa.
If you need assistance with selecting the right Freezone in the UAE, or any other related company set up, restructuring, local partner or PRO support matter in Abu Dhabi, Dubai, the wider UAE, Oman, Qatar or Saudi Arabia, then please do get in touch with us on +971 (0)4 456 1761 for Dubai or +971 (0)2 448 5120 for Abu Dhabi, email us at email@example.com or complete the contact form below and we will be delighted to assist you.
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