One of the most talked about features when you are looking to establish your business in UAE is the free trade zone it offers to international investors. Free zone refers to the selected areas which are designed by UAE in which a foreign investor can set up his company and have 100% ownership. Unlike Mainland Company, Free Zone Company does not require you to have a local sponsor and split your share to a maximum of 49%. Instead, free zone offers you complete ownership as well as a minimum to no tax payment. Why is this so? Because to boost the economic activity in UAE by encouraging foreign investors to start up their business here.
The United Arab Emirates offer more than 40 free zone areas. It can be difficult for an entrepreneur to select which area will cater his needs. Moreover, often free zone is confused with an offshore company. There are similarities in their features however both are different forms of a company. An investor must understand both the advantages and disadvantages of both forms of a company as it will help him choose the type which suits his needs. Offshore and free zone company are similar in respect that they are owned completely by the foreign investor i.e. 100%, both companies do not need a local sponsor, both are allowed to have bank accounts in UAE, and both are registered by free zone authorities. The difference between both these forms of a company is that Free Zone Company can operate with the free zone or UAE however offshore company cannot operate their business in UAE directly.
In UAE, free zones are usually allocated to seaports or industrial areas. Their benefits are,
- Complete foreign ownership
- Can be formed by only one person
- Exemption from personal and corporate tax
- Complete repatriation of company profits
- No custom or import duty
- Confidentiality of assets
- Energy is abundantly available and relatively cheap
- Workforce is readily available and recruitment process is easy
- Company can work throughout the day (24 hours)
- You can hold real estate property in UAE
- You can hold multiple currencies
- Communication system is modern and efficient
However, there are certain limitations too for a free zone company. A Free Zone Company cannot trade directly with UAE market. It can join the local market only through the locally appointed distributors. 5% custom duty is also applied in that case.
Free zone companies are further classified into free zone establishment (FZE) and free zone company (FZC). Free zone establishment is owned by one person or organization whereas Free Zone Company has two or more shareholders.
There are various free zones in Dubai namely Jebel Ali Free Zone (JAFZA), Ajman Free Zone (AFZ), Dubai Media City (DBC), Dubai South Free Zone Company etc. Each free zone has its own set of rules and regulations and it depends on nature and requirement of the company to decide which free zone to go for that will cater to its needs.
Ajman Free Zone:
Ajman free zone was established in 1988 and it was given autonomous status by Sheikh Humaid Bin Rashid Al Nuaimi in 1996 which lead to huge growth in the number of companies in this area. Ajman free zone is located along the entrance of the Persian Gulf targeting eastern and western markets. The primary purpose of its creation was to boost industrial growth and promote international trade as Ajman is closer to Sharjah and Dubai which will provide easier access to two international airports and four ports. Doing business in Ajman free zone will be suitable for you if are going into trade. Ajman free zone not only provides best warehousing facilities but it also has leasing period of twenty years for the companies.
Dubai Multi Commodities Center:
The most popular and fastest growing free zone of UAE is Dubai Multi Commodities Center. It has over 12,000 registered members. This zone provides the physical and financial infrastructure for the trade of global commodities. The main commodity groups are gold, diamond, pearl and tea. This zone is located in the center of Dubai with two airports within reach of thirty minutes and Abu Dhabi is at one hour distance. DMCC has made the registration and licensing process easier through e-registration and a longer period of the license. So if you are looking for the commercial trade of commodities, this market is suitable for you.
Dubai Airport Free Zone Authority:
Dubai Airport free zone authority was created in 1996 and since then attracting a lot of foreign investors and approximately 1700 industries are operational here having the nature of information technology, electrical, cosmetics, pharmaceutical, aerospace, aviation, logistics and freight, food and beverage, jewelry, precious stones and luxury items. So if you are looking to set up a business in DAFZA, you will have access to world-class established offices and airport facility which will aid you in transportation, also important governmental authorities have their offices here which will help you get right kind of information for your business.
Dubai Media City:
Dubai media city was established in 2000 with the purpose to boost the media and holds home to many media houses such as news agencies, publishing, online media, publishing and broadcasting. Having over 2000 media players, DMC is refreshingly new initiative which invites the most creative minds to explore and develop its area.
Fujairah Free Zone Company:
Fujairah free zone is located on the east coast of Dubai promoting rapid economic development. Fujairah free zone provides access to Fujairah airport and seaport. So if you are looking for business on the eastern side, this zone with its good infrastructure is most suitable for you.
Hamriyah Free Zone:
Hamriyah free zone was established in 1996 in Sharjah. One of the greatest advantages of this zone is its 360 degrees connectivity. It has seaports on both eastern and western side with direct access to the Indian Ocean. A lot of development is taking place in this zone. The key benefits for businesses include a longer period of easing i.e. 25 years which can be renewed after its expiration, excellent warehousing and office structure is present, lower cost of living, good transportation and telecom services, cheap electricity and readily available labor force is there.
Looking for the free zone which suits your business needs can be a tedious task. It is advisable to get assistance from a consulting company which will provide you with right kind of information so that your decision-making process is easy and not time-consuming.
We KWS Middle East is amongst the best consulting agencies having the most professional experts ready to guide the clients who need to establish their businesses in the UAE free zones. Contact one of our experts and Get Free Consultation for your requirements.