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UAE Free Zone company formation in Dubai, UAE (FTZ) – how to open and why

UAE Free Zone company formation in Dubai, UAE (FTZ) – how to open and why

The UAE has become the clear front-runner in terms of the country being highly business-friendly. One of the “secrets of success” of the UAE is the effective implementation of the Free Trade Zones across different emirates of the country. These are the specially designated territories in Dubai and other emirates which give the possibility to open companies for practically all types of activities whereby these companies can be entirely in foreign ownership. Free zones are designed for boosting international business by providing complete ownership to the foreign investors. Free Zones in Dubai and the UAE are governed pursuant to a special framework of rules and regulations applicable to concerned free zone.

If you want to have 100 per cent ownership of your Dubai company, regardless of type of business, you need to opt for a license and location in one of the many free zones of UAE. They are designed to encourage foreign investment with easier start-up processes, labor and immigration procedures, 100 per cent ownership for all nationalities and other legal services. Each free zone has its own authority and its own rules, which are applicable to investors looking to set up firm in those zones.

What is the UAE Free Zone Company and reasons and how to open it

The definition of the Free Zone is: the special territory which provides certain incentives for business. In case of the UAE these territories provide, apart from the full ownership by foreigners, completely the tax regime. Means all the activities of such companies, once opened, are totally free from any types of taxes and customs in Dubai.

The free zone is a concept that was developed to help the promotion, growth and development of the businesses. Many countries have similar models and this concept is well known in the international business community. The United Arab Emirates had established Free Zones in order to attract companies that dealt with various types of business. So far, this model has been extremely successful at its purpose.

A free zone company is the most fruitful Dubai legal entity that not only offers the benefit of 100% ownership to the investors or entrepreneurs but a host of other exclusive advantages that other legal forms do not have. Normally for setting up companies in UAE mainland, the expatriates need a local sponsor but through free zone companies the expatriate can set up their business without the local sponsor and he can enjoy 100% repatriation of capital profits. A free zone offers 100 % corporate and personal income tax benefit.

A Dubai company can be registered as an independent one or as a branch of a UAE or international company. When a free zone company is to be incorporated, in majority of free zones it needs to showcase its solvency. The procedure is quite simple. A bank account will need to be opened in the name of the company in any UAE bank. The share capital will have to be deposited in the account. The bank statement will be required by the Free Zone Authority. After the setup of the company is satisfactorily completed, the capital will be released and can be used by the company.

Freezone company formation in Dubai will have certain restrictions when conducting business inside the United Arab Emirates. The free zone company can undertake trading business within the UAE only through locally appointed distributors. Companies in the Free Zone need to construct a physical office inside the designated area. Virtual offices can be rented if a full scale office is not required.

Even though all free zones in Dubai and other emirates provide many attractive schemes for the benefit of the investors, not all are the same when we consider the facilities offered by them. Therefore it will be worth to have a glance over the facilities offered by each, one by one. The details mentioned below are for the guidance of the investors, and the facilities may be subject to change from time to time when such decisions are being taken by the Free Zone Authorities. It is important that new investors get in touch with us for latest details before they plan a business setup in UAE Free Zone.

Freezone (FTZ) company registration in UAE

In free zones of Dubai and other emirates you can set up different types of companies based on your requirements.

  • Free Zone Establishment (FZE) – Single shareholder
  • Free Zone Company ( FZC) – Two or more shareholders
  • Branch Company – Branch of local company or branch of foreign company

Advantages of Dubai, UAE Free Zone Company formation and reasons to open

Setting up a business entity in one of the United Arab Emirate’s Free Trade Zones (FTZs) may be an engrossing alternative for foreign investors. Ever since, the free zones in Dubai and other emirates are fruitful in enticing considerable number of firms and foreign direct investment and growing net non-oil exports.

Moreover, the United Arab Emirates free zones are deemed as part of the strong backbones of the nation’s economic performance inviting the majority of foreign investments, boosting job opportunities and administering the necessary technology transfer of technology into the nation. Presently, the free zones account for over one half of the nation’s non-oil exports and base the United Arab Emirates’ status as the third most notable re-export center in the globe. The Free Zone companyin Dubai and other emirates:

  • Allows 100 per cent foreign national ownership.
  • Absence of all type of corporate taxes and exemption from import and export taxes.
  • No limits on repatriation of revenue and profits.
  • Easy availability of business, housing, immigration, labour and other facilities.
  • No foreign exchange controls
  • Simple process to obtain residency visas for company owners and employee
  • Guarantee for up to fifty years against the future imposition of corporation tax

Pros and Contras - top reasons why to open company in Free Zone in the UAE

Pros for this company typein Dubai or other emirates

  • To open a company you need to come to UAE for 1-2 days only, rest is handled by our advisors.
  • There are the possibilities to register such company without the requirement to pay the share capital
  • Upon completion of the company set up you have the option to obtain residency visa in the country for you and your family.
  • Free tax regime and no limitations on capital and profit transfer abroad
  • Highly reputable jurisdiction and availability of stable banking system

Disadvantages of Free Zone companies

  • More cost-intensive when compared with offshore companies
  • Require yearly audit – there would be no tax, but this means some extra administrative work
  • It is necessary to file VAT declaration if the company turnover which is subject to VAT is more that AED 375.000,- per annum.

How to open Free Zone Company in Dubai, the UAE - registration procedure

The procedure outlined below is typical for Freezone company registration in UAE. A free zone may skip or add some steps. The time taken to complete this procedure is from 2 days to 3 weeks from the application – depending on a free zone in Dubai and other emirates.

1. The first requirement to set up a freezone company in UAE is to decide who will the shareholder. You or your home company. Normally when you have more than one shareholder the suffix is FZ-LLC otherwise it is FZE – Free Zone Establishment.

2. Thereafter you need to decide the share capital. Many free zones have the requirement for a minimum share capital. This is always given in UAE Dirhams (AED).

The share capital is per shareholder in some free zones and in others, it is total for the company. Starting from AED.50,000 it goes up to AED. 1 million in the case of Jebel Ali Free Zone. If you need to register a company without paying any share capital – such companies are also available.

3. You need to decide on the company name and who will be the Manager of the new company. The Manager’s name appears on the trade license. A choice of final company name is made by the free zone authorities from 3 alternatives submitted by you.

4. Next, an application for the name and activity is made for approval. Once this is done, the application in detail must be submitted.

5. The application form for the free zone along with passport copies of the shareholders and the Manager must be submitted to the free zone authorities in Dubai or other emirate.

If the shareholder is a company then the company documents (attested) with the passport copies of the Manager must be submitted. Some free zones ask for a business plan in brief.

6. A preliminary approval is granted and a letter to open a bank account is issued for the investor to deposit the capital. This capital must be retained until the License is issued. This step is applicable only for the companies which require paying the share capital.

7. After depositing the capital in your bank account the bank will issue a letter. This is to be submitted to the free zone authorities to complete the legal process of registration. This step is applicable only for the companies which require paying the share capital.

This further process involves payment of license and registration fees, lease rent, signing the Memorandum of Association for the new company and a resolution of the Shareholders.

8. Once the registration process is completed the license is issued and you are ready to start operations.

The costs to open Free Zone company in Dubai, the UAE

The opening costs vary from free zone to free zone. It normally comprises of

  • One time registration fee and name approval charges
  • Annual trade license fee
  • Annual office lease rent
  • Post box rent
  • Immigration and Labor registration charges
  • Any notarization fees
  • Registration agent fees

Some free zones in Dubai and other emirates also provide the possibility of company formation with a standard minimum package for a single or a couple of investors that offers all components of costs for a lump sum annual fee. These packages are cost-effective.

Open company – important to know - different permitted activities depending on free zone

Each free zone has its certain particulars in terms of activities being permitted. Below we give a couple of specific examples of certain free zones in Dubai.

In DMCC , within company formation you can choose from over 600 business activities ranging from over 20 sectors such as energy, commodities, gold and diamonds, technology, constructions, FMCG, healthcare, aviation, shipping, education, media, professional services, financial services and personal and community services.

In DIFC, you can conduct financial and non-financial businesses. Financial businesses include banks, insurance, wealth management and capital markets. Non-financial businesses include retail shops, restaurants, five-star hotels, art galleries and academic institutions.

FAQs related to Free Zone companies and how to open it

What are the types of businesses I can do in a free zone?

You can do any business in the fields of financial, educational, retail, hospitality and media to name a few. Check with the respective free zone authority for businesses permitted on their premises.

What is the time required to open UAE Free Zone Company

Setting up a business in Dubai, the UAE can be an overwhelming experience for the uninitiated but we can make this job truly easier for you. Talk to our expert consultants for free & decide the best course of action for yourself, today.

What shall I start with for company formation ?

There are two options available for formation of a company in the UAE – you can start learning all the particulars of each free zone in in Dubai and other emirates of the UAE in order to decide which one is best for you. However such approach can require a lot of time as there is a large number of free zones and each has its certain pros and cons. Second solution – you get in touch with us and we provide you all the info and complete support.

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