Free Zone Companies
Previously we looked at the professional license, what kind of businesses it is for, and how to go about setting one up. In this article we are looking at UAE Free Zone companies, what they are, and what kind of business operations they suit.
What is a UAE Free Zone?
Free Zones are special commercial areas that are regulated by their own authorities, therefore making them separate jurisdictions than the UAE mainland.There are about 45 active Free Zones, with a further 5 in development, so there is a lot of choice available to investors and entrepreneurs on where to start their business.
The key benefits of the Free Zones are:
- 100% Foreign Ownership
- 100% Repatriation of Profits
- 0% Import Duty on Goods into the Free Zone
Each of the Free Zones tend to cater to a wide variety of business activities, but will also specialise in certain sectors. For example, if you were a logistics company and were looking for a Dubai Free Zone, you could consider Dubai Airport Free Zone, or Jebel Ali Free Zone.
Other Free Zones such as Dubai Media City, or Dubai Multi Commodities Centre cater to areas like media production and commodities trading respectively. If you are looking to start a business in a Free Zone Dubai, then you have quite a wide choice of authorities to choose from.
Free Zones typically require for a business to have its registered office within the Free Zone’s area, this is in part due to the fact that a Free Zone business is not allowed to trade directly with the mainland UAE market, unless using a local agent.
The different Free Zone authorities provide business centres ranging from smart/flexi desk options for single investors right through to full sized offices and buildings. Some Free Zones also have private developers, from who you can rent your office space directly and still be eligible for a Free Zone license.
What type of companies are available in a Free Zone?
Generally there are two types of Free Zone entities available, a Free Zone Establishment (FZE) or a Free Zone Company (FZCO).
Free Zone Establishment
A Free Zone Establishment has a single shareholder, which can be either an individual or a corporate. It has limited liability, and can open a bank account in the UAE.
Free Zone Company
A Free Zone Company has a minimum of two shareholders, which can be either individuals or corporate shareholders. It also has limited liability and can open bank accounts in the UAE.
What kind of businesses suit Free Zones?
With the large number of Free Zones in the UAE, there is likely an option to suit most businesses. Free Zone companies include service providers, consultants, MNCs, and trading companies.
Companies involved in selling of goods, and who wish to sell goods to end users throughout the UAE, the company must work through a local UAE registered company or distributor. Any goods that leave the Free Zone and are entering the UAE mainland, they will be subject to a 5% import duty.
Companies who are selling to foreign markets, the Free Zones provide a great option of somewhere to base their operation, and minimize their tax requirements.
Expanding to the mainland
Many companies set up Free Zone entities due to their perceived lower costs over operating on the mainland. When these companies then wish to expand to the mainland, they have a number of options.
Firstly they can open a branch license onshore (mainland) of their FZE or FZCO, licensed by the DED, they can then carry out their business directly with the UAE market.
The second option is to liquidate their existing Free Zone entity, and establish a new mainland license.
If you would like to find out more about UAE Free Zone setup, speak to our team today on email@example.com