Dubai’s free zones boast an attractive business environment that makes it easy to establish and operate in the UAE. Many free zones are available in Dubai, all aligned to specific sectors. Some of these include the benefits of 100% foreign ownership, tax exemption, and fantastic access to world-class infrastructure.
It is one of the ways Dubai has become a global business innovation hub and continues to grow. So, let’s talk about free zones in Dubai and their inherent features, why businesses will love to conduct operations there, and those who opt to set up inside such free zones.
What is A Free Zone?
A free zone with its rules and regulations is a distinct economic area. Business setup in Dubai free zone is permitted, and full foreign ownership and tax exemptions provide advantages.
Free zones exist throughout the United Arab Emirates, yet Dubai remains the top choice for international investors. Two especially noteworthy free zones include the Ajman Free Zone, which offers low initial costs, and the Meydan Free Zone, which provides commercial options. Regarding international routes and cutting-edge infrastructure, logistics companies in the Jebel Ali free zone have a key position.
Free zones were instituted to develop diversified economies by attracting foreign investors and ensuring an environment that helps businesses grow. The first free zone was the Jebel Ali free zone, established in 1985, and today, more than 40 free zones operate in the UAE.
Dubai Free Zones: Contributing to Global Recovery
This model has rapidly expanded since the first free zone was established over 60 years ago. Through more than 7,000 free zones, more than 145 countries currently employ over 100 million people directly or indirectly. A critical participant in global trade is free zones. According to the OECD, they currently export over $3,500 billion annually.
They contribute significantly to economic growth and almost 20% of global product trade. The most significant contributor to the UAE’s economic growth is Dubai Airport Free Zone, which benefits from its proximity to Dubai Airport Free Zone metro station 1. There are certain disadvantages of free zone companies in Dubai, such as restricted access to the mainland market without the need for an extra authorisation.
Industry-Specific Dubai Free Zones
Dubai free zones are categorised by target sectors, facilitating economic growth and innovation. They facilitate specialisation through sector-specific infrastructure, services, and regulation-related benefits.
Some of the most significant sector-specific free zones in Dubai are:
1. Technology and Innovation-Free Zones
These zones are like Dubai Silicon Oasis. These free zones offer high-technology infrastructure and labs for technology start-ups or companies’ research and development. Access to appropriate talent and streamlined processes afford innovation.
2. Media and Creative Industries
Dubai Media City offers specialised studios and advanced advertising, publishing, and film production equipment, assisting media and related business sectors in these areas.
3. Healthcare and Medical Services
Dubai Healthcare City is a medical institution for research organizations and pharmaceutical operations that advances medical tourism and research-based healthcare facilities.
4. Logistics and Manufacturing
The Jebel Ali free zone is a centre for logistics and manufacturing that serves as a logistical support centre for businesses involved in import/export activities besides industrial activities that sport world-class warehousing.
5. Financial Services
Dubai International Financial Centre provides financial regulation and develops infrastructure to offer modern facilitations for international trade.
6. Education And Research
The sectoral-specific zones in Dubai encourage the collaboration of academic institutions and research organisations offered by Dubai Knowledge Park and Dubai International Academic City.
These are aimed at contributing to the diversification of the UAE’s economy. Dubai has more than 40 free zones and is leading the world in business facilitation.
Benefits of Dubai Free Zones
Dubai Free Zones have much to offer businesses in terms of expanding or starting their operations in the UAE:
- 100% foreign ownership.
- 100% repatriation of capital and profits.
- Tax exemptions.
- No foreign exchange controls.
- 24/7 operational flexibility.
- Variety of commercial office options for sale or lease.
- Easy start-up and licensing procedures.
- Industry-specific infrastructure and clustering.
- Exemption from import/export duties.
- Low freight charges.
- Access to a multicultural workforce.
- Streamlined immigration process.
Dubai Free Zone vs. Mainland
1. Ownership
Dubai free zone companies allow 100% foreign ownership, whereas Mainland companies are allowed only 49%.
2. Business Scope
UAE free zone businesses operate only within the zone, while Mainland businesses can trade across the UAE.
3. Workspace
Mainland businesses require a physical office of at least 200 square feet, while some Free Zones allow virtual offices.
4. Visas
The number of visas for mainland businesses is determined by the size of their offices, whereas Free Zone business visas depend on specific authority regulations.
5. Business Setup Approvals
Mainland companies require clearance from more than one government agency, and a streamlined regulation is applied in Free Zones.
Types of Business Licenses Available in Dubai Free Zones
1. Industrial License
Manufacturing concerns include the production of machines, chemicals, and food.
2. Professional License
This applies to businesses providing professional services like consulting, accounting, and creative services.
3. Freelance Permit
For independent contractors in various fields. This license enables freelancers to operate without being tied to a company.
4. E-Commerce License
Businesses conduct online trade and focus on the sale of goods.
5. Tourism License
Hotels, travel agencies, and tour operators represent the affected businesses.
6. Commercial License
The four activities in the trading business fall under wholesale and retail sectors alongside import/export and distribution operations.
Dubai Free Zones remain business-friendly. Over 40 zones in the city support a wide range of industries and sectors.
Types of Legal Entities in Dubai Free Zones
In the Dubai free zone, two primary legal entities can be established by businesses:
1. Free Zone Company (FZCO)
An FZCO is the same as an FZ LLC, except it allows over 50 shareholders. Its minimum of one director and one secretary requires a company to be operated under the director and secretary. It should best be suited to businesses wanting greater participation in ownership and investment diversification.
2. Free Zone Establishment – (FZE)
It is a simplified form of company with only one shareholder. It can be a natural person or a corporate body, thus ideal for businesses owned by only one person, private or public. The shareholder is responsible for all the company’s activities and liabilities.
Business Setup Procedure in Dubai Free Zone
The business setup procedure in the Dubai Free Zone includes the following:
- Determine the Activity Type and Entity of Your Business: This depends on your business form, whether FZCO or FZE.
- Choose a Trading Name: The name should qualify according to the UAE government requirements.
- Obtain a Business License: Attach any required documents, such as a business plan or financial reports.
- Office Space: Free zones have different office options, including flexi-desks.
- Apply for Registration and Obtain the License: After completing all the application formalities, you can start doing business.
- Open A Corporate Bank Account: To start doing business, you must open a bank account.
Approval, Registration, Licensing, and Visa Processing Requirements
Documents that are generally considered are:
- Application form.
- Copy of the shareholders’ and directors’ passports.
- UAE residence visa if the company needs the same.
- Business plan for some specific Free Zones.
Once approved, you will be given a lease agreement, trade license, and employee visa.
Can Dubai Free Zone Companies Operate On The Mainland?
Dubai Free Zone companies can engage in mainland business under certain conditions:
- Approval: Obtain necessary approvals from the Free Zone authority.
- Approaches: Engage a mainland logistics partner, use courier services, or establish a branch in the mainland.
Conclusion
Businesses find free zones in Dubai beautiful thanks to their sağlaying tax advantages, complete ownership guarantees, and simple setup procedures. The carefully planned industry hubs world-class infrastructure, and strategic locations in Dubai zones specifically attract worldwide investors to these locations. A business must select its Dubai Free Zone base according to its operational requirements to maintain enduring prosperity in the UAE.
FAQs
1. What is the difference between an FZCO and an FZE?
FZCO has shareholders of more than 50, while FZE can be created for an entity with only one shareholder. In business terms, this means an FZE can be adapted for any number of investors in a business, whereas it is ideally suitable for individuals or minor concerns.
2. Is the Free Zone company allowed to do business on the mainland of Dubai?
Yes, the Free Zone company can do business on the mainland of Dubai. Still, it must obtain a permit the Free Zone authority granted in advance and perhaps include a logistics partner on the mainland or set up a branch.
3. What are the total expenses to establish a business within Dubai Free Zone?
Setting up a business through a Dubai Free Zone costs between AED 15,000 and AED 150,000 based on various business factors, including business nature types of office space and visa numbers. The setup cost of small businesses within Dubai Free Zones ranges from AED 15,000 to AED 60,000, while extensive business setups are significantly more expensive.
