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What is a Free Zone and Why Should You Consider One?

Dec 23, 2021 | Featured Posts, Free Zones

The UAE, renowned for its entrepreneurial spirit, has increasingly diversified beyond oil, making Dubai a hotbed for diverse business ventures, especially in its free zones. Discover the allure of these zones in our comprehensive guide, focusing on Dubai Media City. We cover the essentials – legal frameworks, regulations, and the extensive benefits for companies and entrepreneurs alike.

Whether you’re an established businessperson or just exploring opportunities in Dubai’s free zones, this article will cover what a free zone is and why you should consider setting your business up in one.

A business investors meeting in Sharjah or Dubai.

What is a Free Zone?

Free zones, also known as free trade zones or free zone authorities, are designated economic areas where goods and services are traded under preferential tax and customs regulations. These zones are characterized by 0% tax rates, exemption from import and export taxes, and favourable customs duty rates, making them highly attractive for business operations.

A key feature of free zones that appeals to privacy-conscious entrepreneurs is the allowance for 100% foreign ownership. This means that foreign investors can fully own their companies without the need to partner with a local sponsor. Additionally, free zones offer enhanced privacy, as sensitive corporate information, including shareholder details, is not made public.

Free zones cater to various industries, providing businesses access to Dubai’s dynamic markets and world-class services. Industries such as infrastructure, media, education, construction, and retail, among others, can thrive in these zones. The versatility of activities and the business-friendly environment make free zones an ideal choice for company formation, especially for those targeting the South Asian region in the Middle East.

Among the most notable is Dubai Internet City, which is a prime example of a free zone tailored to modern business needs. The prevalence and easy accessibility of free zones in Dubai make setting up a business here a straightforward and attractive proposition for entrepreneurs and investors.

The Top 7 Free zones

  1. Dubai Internet City: A hub for IT innovation, Dubai Internet City is a technology-focused park housing numerous global tech firms. It’s a central location for activities like software development, business services, and IT support.
  2. Dubai Media City: Aimed at enhancing the UAE’s presence in the media industry, Dubai Media City is home to a mix of international and regional media entities. It’s an active centre for various media-related activities, including production, advertising, and communication.
  3. Ajman Free Zone: Recognized for its affordable business setup options, Ajman Free Zone offers a variety of facilities suitable for diverse sectors such as trade, services, and industry.
  4. Dubai Knowledge Park: This zone specializes in human resources, professional development, and educational initiatives. It attracts academic institutions, training centres, and HR firms, making it a centre for learning and development.
  5. Fujairah Creative City Free Zone: Dedicated to the creative sector, this Free Zone supports professionals in media, events, consulting, education, communication, and marketing, providing a nurturing environment for their growth.
  6. Dubai Design District (d3): d3 is a creative hub focusing on design and fashion. It nurtures local emerging talents and hosts international brands in design, luxury, and fashion.
  7. Ras Al Khaimah Economic Free Zone: Known for its affordable and diverse business solutions, this Free Zone serves a broad spectrum of sectors, including industrial, trade, and services. It is appreciated for its business-friendly environment and variety of facilities.

History of The Free Zone

Dubai’s Free Zones are pivotal in boosting international business, particularly in the Emirates region. These zones are designed to attract global business by allowing 100% foreign company ownership, thus providing lucrative opportunities for both travellers and locals. The United Arab Emirates boasts 45 such zones, with popular ones in Fujairah, Sharjah, Umm Al Quwain, and Ras Al Khaimah.

These Free Zones have evolved to offer significant advantages to businesses, integrating city and emirate regions under the governance of the International Free Zone Authority (IFZA). They allow companies outside the Free Zone to engage in international trade, fostering global business connections.

Each Free Zone caters to specific industries or business types. For example, Dubai Healthcare City focuses on the healthcare sector, while small businesses prefer the Fujairah zone. The JAFZA Free Zone Authority, linked to the region’s largest port, is ideal for those involved in international trade.

A unique feature is the Dubai International Financial Centre (DIFC), situated at the heart of Dubai. DIFC stands out as a prestigious financial district in the Middle East, operating under its jurisdictions and the English Common Law framework.

Understanding Dubai’s Free Zones is key to exploring the potential benefits for your business, especially when considering a company set up in these zones.

An office space in Fujairah Emirate Free Trade Zones.

Why Set Up in a Free Zone?

The UAE’s thriving economy offers excellent opportunities for investment and business growth, making it an attractive destination for professionals worldwide. Free Zones in Dubai, such as Dubai Media City, are leading in various industries, providing compelling reasons to set up a business there.

Easy Setup

Establishing a company in a Free Zone is straightforward, often requiring basic documentation such as a passport and business credentials. The process typically takes a few weeks and includes flexible options like flexi-desk and virtual packages. This allows freelancers and entrepreneurs to make use of the free zone address and facilities on an ad-hoc basis. A Dubai free zone is a fantastic way to help you set up your business in the Dubai Internet City.

Tax and Duty Incentives

Free Zones offer significant tax benefits, including 0% corporate and personal tax and exemption from VAT, currently set at 5%. Businesses enjoy full repatriation of profits and capital and are exempt from import and export taxes.

Further to this, the fact that free zone businesses are exempt from import and export tax means they can trade with no currency restrictions.

Set up in a free zone and benefit from corporate and personal tax exemptions. What’s more, your business will also be exempt from VAT, currently at 5%.

Foreign Ownership

Another major plus to setting up in a free zone is foreign company ownership. Unlike the UAE mainland, free zones allow 100% foreign ownership of companies, eliminating the need for a local partner.

Trading Within the UAE

One of the regulations that UAE free zone companies must abide by is the prohibition of direct trade within the local market of the UAE. Fortunately, this hurdle can be readily overcome once meaningful networks have been created with investors in your industry.

A great option is to access and collaborate with a locally appointed distributor. They can offer up your goods and services to market in return for a fee. Alternatively, it’s possible to establish your business and then open branch offices of your free zone company throughout Dubai and the Emirates at a later date. These satellite offices can be used to market the offerings within the United Arab Emirates mainland.

Ongoing Support

Free Zone authorities provide support services, including visa assistance, help with corporate bank accounts, and professional advice. They also offer access to startup hubs and growth initiatives for business development. Most free zones offer assistance with applying for visas for both shareholders and any applicable dependents, including spouses or domestic staff.

Many also assist with opening corporate bank accounts, advising on the best institutions to suit your needs. Regarding ongoing support, it is not unusual for an individual free trade zone to offer professional advice and networking services. Additionally, several zones offer access to startup hubs and growth initiatives to help new businesses get up and running.

Ras Al Khaimah and Umm Al Quwain free zone investors shaking hands in a meeting in Dubai.

What Is a Free Zone and How to Get Set Up?

Setting up a business in a free zone in Dubai or elsewhere in the UAE can offer significant benefits. The process is straightforward and can be broken down into five easy steps:

Step 1: Choose Your Business Activity

  • In the UAE, you have a wide range of business activities to choose from. Some activities may require additional approvals or licenses, depending on their nature. It’s common for companies to select multiple activities under one license.
  • Your chosen business activities will influence both the cost of your license and the most suitable free zone for your needs.

Step 2: Finalise Your Company Name

  • The UAE has specific rules regarding company names. Avoid offensive language, religious references, and names resembling known organizations.
  • Check the availability of your desired name early in the process, as popular names can be quickly taken.

Step 3: Apply and Submit Your Documents

  • The standard documents usually required include shareholder passport copies, contact information, and sometimes a business plan.
  • Requirements can vary between free zones, so it’s important to verify the specifics of your chosen zone.
  • Engaging with a business specialist can help ensure compliance and efficiency in this process.

It’s a good idea to collaborate with a business specialist at this stage. They’ll ensure all documents are in order to avoid unnecessary delays.

Step 4: License Notification and Opening Bank Account

  • Once you receive your business license, collect your corporate documents and open a corporate bank account. The chosen free zone can usually help find suitable banks that meet your individual requirements and provide a full suite of financial services.
  • Different banks may have varying requirements for opening corporate accounts, so it’s wise to research these beforehand.
  • The chosen free zone can often assist in finding suitable banking options.

Step 5: Visa Processing

  • The final step involves immigration and visa processing, which a free zone authority representative or a company setup specialist can manage.
  • Be aware of the different types of visas available (e.g., investor visa, employee visa) and that the number of visas you can apply for may depend on factors like the size of your office space.
  • A company specialist can provide professional services which take the stress out of the entire process. Conveniently, they can liaise with the right government departments and authorities to expedite your visa approval.

Office employees working at computers in various free zones in Dubai.

Freelancing in a Free Zone Authority

Looking to create that elusive perfect work-life balance dream in Dubai or anywhere in the United Arab Emirates?

Beyond Dubai South, it’s now even easier to establish a career as a freelancer in the UAE. Conveniently, many free zones offer freelance licence packages at affordable costs. These permits not only enable you to operate as a sole practitioner across various trade sectors but often come bundled with visa eligibility and access to shared office spaces like Flexi desks.

The range of industries thriving in Dubai’s free zones is diverse. Key sectors that are particularly conducive to freelancing include media, health and fitness, infrastructure, IT and software development, and graphic design. While these opportunities are widespread, it’s important to note that the specific offerings can vary from one free zone to another.

Design your ideal life with great work flexibility and the freedom to entertain various income opportunities. 

Company Set Up in a Dubai Free Zone

Establishing a company in a free zone presents a compelling opportunity for entrepreneurs and businesses looking to expand their horizons. With benefits such as tax exemptions, full foreign ownership, and streamlined business setup processes, free zones in regions like the UAE offer a fertile ground for business growth and international trade.

Beyond the economic advantages, free zones provide a supportive ecosystem, fostering innovation and networking in a diverse community of like-minded professionals. Whether you are a startup, an SME, or a multinational corporation, the strategic advantages of a free zone can align with and amplify your business objectives, making it a prudent choice for those seeking to tap into new markets and opportunities.

FAQ’s

Do I need a sponsor to establish a company in a Dubai Free Trade Zone?

No, you don’t need a sponsor to establish a company in a Dubai Free Trade Zone. One of the major benefits of investing in a Dubai Free Trade Zone is that foreign investors can enjoy 100% ownership of their business without needing a local UAE sponsor.

How much does it cost to establish a Business in a Dubai Free Trade Zone?

The cost of establishing a business in a Dubai free trade zone varies based on several factors, including the type of business and the specific free zone. Each free zone offers different packages, with some being more cost-effective than others.

What is the difference between free zones and freehold areas in Dubai?

Free zones and freehold areas in Dubai are distinctly different. Free zones are designed to set up businesses and offer benefits like tax exemptions and 100% foreign ownership. Freehold areas, on the other hand, refer to properties where non-GCC residents can have full ownership and are free to lease, sell, or live on the property.

Setting up your own business has never been easier. Virtuzone Dubai is a comprehensive professional service catering to the requirements of all corporate activities. For more information about forming a company in Dubai and the UAE mainland or more information on what is a free zone, contact us today. Please call us on +971 4 457 8200, send an email to the following email address: info@virtuzone.com or click here. 

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