A foreign investor can set up a company in the UAE, either in one of the many free zones or on the UAE mainland. Free zone authorities are the government bodies that register and issue business licences to non-resident companies in the UAE free zone. Free zones allow corporate structures to have a physical presence in the UAE, allow 100% foreign ownership and offer prebuilt facilities and modernised one stop-shop registration and administrative services
A freezone is a defined and isolated land or setting, with a special tax, customs, and imports regime, that is different from a mainland area. The main advantage of owning a freezone company is that as an expatriate, you can own the business 100% without having to give out any of its shares.
There are many advantages to establishing a company in a Free Zone, including:
There are also some additional benefits of trading within a Free Zone. Many Free Zones arrange regular training and networking events which are usually free to attend. Most have meeting rooms available to hire privately for a fee, and many will encourage members to share business opportunities within that Free Zone.
1. Overview of Business
a) A freezone company can only conduct business inside is specific freezone or outside of the UAE. It cannot provide its services or sell its products in any UAE mainland UAE jurisdiction.
b) The restriction of local business through a distributor is mainly to differentiate the business in the local market by mainland companies and freezone entities used for import/export. A distributor that has a Mainland license can act as your local agent and charge a certain fee which is lower than the 5% duty applicable on freezone invoices, if they trade directly into the local market. In case the company chooses to use a distributor, the goods should be shipped in through the distributor itself, if not, a 5% duty fee is applicable for any goods exiting the freezone.
C) Marketing a freezone company can also be restricted as you are legally only allowed to market your company inside the freezone, may that be face-to-face or even handing someone a business card.
2. Ownership Structure
Compared to the Mainland, a freezone license is 100% owned by the expatriate. There is no need for UAE National partner/service agent. Note that mainland laws have changed recently to allow 100% ownership with a wide variety of activities.
3. Office Space
Unlike the mainland, a freezone license can be incorporated with or without a physical office. Freezone Authorities allows the license holders to use a smart/flexi office usage but this restricts you on visa allocation usage.
4. Visas Eligibility
Freezone companies are limited to a certain number of visas and this normally varies from 1-6 visa packages. If you require more than the allotted allocation, then you may be asked to rent physical space inside that freezone, this can be costly due to the limited supply but high demand of commercial space.
5. Governing body approvals
The main purpose of having a freezone establishment is for importing and exporting goods and freezone authorities usually do not need approvals from external authorities. However, any external approvals from governing bodies outside of your freezone, will not be entertained.
PRO Partner Group is a professional business consultancy firm with a singular goal – to help entrepreneurs, venture capitalists, and companies find their footing in the competitive Dubai market. As a full-service company, our expertise includes providing a comprehensive range of solutions aimed at speeding up business setup in Dubai free zones.
We have a team of free zone company formation experts who can offer step-by-step assistance to clients, resulting in an easy, quick, and hassle-free setup. Our specialists are happy to take over the entire company setup process, from start to finish, so you can focus on what matters the most – business strategy and growth.
Our range of solutions includes but is not limited to the following:
Strategic business planning – our team can help you identify the most viable free zone in the UAE for your business
Document processing – we can assist you in acquiring, preparing, and completing all the necessary application forms and documents
Trade name application – When applying for your chosen trade name, we can liaise with local government authorities on your behalf
Business structuring – we can provide insight into how to structure your business in compliance with local regulations
Licence acquisition – our specialists can help you to acquire the right licence for your chosen venture
Visa application and processing – our team can assist you in obtaining the right visas for the people joining your company, so you don’t have to deal with the paperwork
Opening bank accounts – we can help you open a corporate bank account with your chosen banking services provider in Dubai
Ongoing PRO Service and Support – following incorporation of your business we can then assist you to obtain investor visas, staff, and family visas and support the company with licence updates, government liaison and company secretarial service.
The average fees for setting up a Freezone licence in UAE, using a flexidesk virtual office with 1 or 2 staff visas is around AED 40,000 all in. The costs will vary from Freezone to Freezone and depending on where you choose to establish your license and your staff and office requirements. Freezone companies are lower cost than setting up a mainland company in the early stages, however, will more staff the office costs in a Freezone will make this type of licence more expensive in the long run. Setting up your business in a Free Zone offers key advantages such as 100% foreign ownership, zero personal and corporate tax as well as no import duties.
The time taken to incorporate a Company in UAE depends greatly on the complexity of the business to be incorporated. A simple Free Zone Enterprise (FZE) may be incorporated in a matter of days, whereas it can take several months for an Industrial facility to obtain all the permits required to operate safely and legally. On average we say to allow 30 days from start to finish assuming all documents are prepared, and the authorised signatories are available.
The commercial space requirements depending on the size of the business, the location and activity. A simple Free Zone Enterprise (FZE) service or consultancy company may be incorporated in a matter of days using a flexidesk or virtual office space at low cost, whereas in an Industrial or Logistics Freezone the company will need to rent industrial pace in order to obtain all the permits required to operate safely and legally – and the formation it can take several months pending approvals of the commercial space.
No, a Freezone company can only work with companies in the same Freezone jurisdiction that has issued the licence and with companies overseas. Strictly speaking the freezone company cannot conduct business with UAE mainland companies, although in practice this is a grey area and particularly for services companies these can often be provided if the UAE counterparty is happy to deal with the freezone company. The Freezone company, in some jurisdictions can now apply for a Dual Licence into the mainland to facilitate working with mainland companies.
An E-commerce platform Licence in a Free zone allows online buying and selling of products in UAE.
Free zones do have their own regulations meaning that companies cannot conduct activities outside of the Free zone.
Therefore, to sell to the mainland you would require a third-party logistic company in order to deliver the products to the end user.
If, however you wish to sell directly to the local market, you would require a Main land Licence.
An E-Commerce trading activity in the mainland will qualify you to trade directly to UAE Mainland via an online platform without the need of a third party.