What is a Free Zone?
A free zone, also known as a free trade zone, is a tax-free zone with minimal trade barriers where goods can be manufactured, imported/exported, handled, or changed without paying customs taxes.
They were first implemented to encourage international business in the region by providing incentives such as 100 per cent foreign company ownership. As a result, there are more than 40 free zones in the UAE.
The free zones of the United Arab Emirates have evolved through time to give ever-increasing benefits to the businesses that operate within them. Many free zones are tailored to specific industries or companies; for example, Abu Dhabi Airport Free Zone (AFZA) is dedicated to aviation, engineering, electronics, logistics & cargo, and pharmaceutical firms.
Benefits of Setting up the UAE Free Zone Company
Setting up a business in a free zone in the UAE offers a host of benefits.
- A company set up in UAE free zone can be wholly owned by a foreign national, with no need for a local sponsor
- No personal and corporate tax and import/export duties
- Provision of 100% repatriation of capital and profits
- Simplified processes for recruitment of suitable workforce at inexpensive rates
- State-of-the-art amenities and cutting-edge infrastructure for any kind of business need
- No charges on transfer of funds
- Easy and quick incorporation of business entities
Legal Entities in the UAE Free Zone
The types of business structures in the UAE free zones are discussed below:
Free Zone Company (FZC)
There are two or more stockholders in a Free Zone Company (both individual and corporate shareholders are allowed). For example, a limited liability corporation (LLC) is a firm that operates in a free zone boundary.
Free Zone Establishments (FZE)
Free zone establishments are for companies that have a single shareholder. This type of establishment consists of a single secretary and two directors.
A branch might be owned by a foreign firm or a corporation based in the UAE. A branch office shares the same legal identity as its parent corporation and does business under the same name.
Types of Business Activities Allowed in the UAE Free Zones
UAE free zones offer a wide range of business activities, among which the followings are the most popular:
- Event management
- Education and training
- IT services
- Music and entertainment
- Film, production and post-production
- Broadcast management
Approved Business Licenses in the Free Zones of UAE
The foundation of a firm in the UAE free zones is incomplete without acquiring a business license. Applicants in the UAE free zones can receive the following types of business licenses:
1. General Trading License: This license allows investors to trade in various items.
2. A trading/commercial license: authorizes you to engage in industrial, commercial or consultancy activities for a set period.
3. Service License Provides legal, accounting, and business consulting organizations with the ability to operate.
4. Industrial License Permits importing raw materials, manufacturing items, and exporting completed goods across international borders.
5. Warehousing Permit: This license allows investors to lease warehouse facilities for the distribution, packaging, and storage of commodities.
6. Manufacturing License: Applicants must have a manufacturing license to create items.
Process of Setting up a UAE Free Zone Company
Every free zone in the UAE has its respective authorities where you have to obtain the license and company registration. However, you have to go through the process to set up the company, which is as follows:
1. Determine the Legal Entity
Decide what kind of business you wish to start in one of the free zones. The capital requirement for such an organization is determined by the free zone you want to establish a business.
2. Choose a Business Name
Choose a trading name for your firm after deciding on the type of legal organization. It's important to double-check the proper trade names with the relevant free zone administration and if the desired name has already been registered.
3. Apply for the License
After selecting a trading name and registering it with the free zone authority's web page, you must apply for a business license. The following is a list of the various business licenses issued by the free zone authorities. Your company's core activity determines the sort of business license you need. When applying for a grant, you must submit supporting documentation.
4. Rent an Office Space
To assist start-ups, free zone authorities offer a flex-desk office service. In free zones, you may either buy or lease office space. The size of your office is determined by the number of workers and the nature of your firm.
5. Obtain the License
Obtain initial and relevant business permissions from the appropriate authorities, register your business on the site and obtain your license. This procedure will only take 2-4 weeks to complete. You are now ready to start your business after you have received your license.
Required Documents for Company Setup in the UAE Free Zone
The required documents for company formation in the UAE free zones are mentioned below:
The Gulf Cooperation Council (GCC) or the Arab Embassy must translate, authenticate, and notarize various papers into English.
- License form application
- Contact person's business card
- a duplicate of the business plan
- Memorandum of Association (MOA) and Articles of Association that have been notarized and authenticated (AOA)
- Copies of the partners' and company managers' passports
- Original bank reference letters and, if appropriate, the license of the partner's current firm.
Consultancy License Documents
A copy of the degree or diploma certificate that mentions the intended activities, or an experience certificate [any of these papers is required]
- Original Board Resolution ensures the branch's financial commitment and an attestation copy of the registration certificate, incorporation certificate, and Memorandum and Articles of Association (MAO and AOA)
- A legal representative's original Power of Attorney and a copy of their passport
- The parent company's bank statements for the previous three months.
Cost of Company Formation in the UAE Free Zone
Dubai Free Zone: Starts from AED 9,999
Sharjah Free Zone: Starts from AED 4,999
Abu Dhabi Free Zone: Starts from AED 4,500
Ajman Free Zone: Starts from AED 5,600
RAK Free Zone: Starts from AED 8,200
UAQ Free Zone: Starts from AED 7,999
*The prices mentioned above are inclined to change based on the additional services.
A-List of the UAE Free Zones
UAE has tons of free zones in almost every emirate. Here is the list of a few:
1. Dubai Free Zone
2. Abu Dhabi
6. Ras Al Khaimah
7. Umm Al Quwain
Free zones provide a plethora of benefits to aspiring entrepreneurs and investors looking to get their firm off the ground. Starting a business here is a breeze if you have local support and know-how. From business registration through legal formalities and value-added services, we at Business Setup Worldwide put your company vision and objectives at the forefront of our care.
Our advisers handle all banking, visa, legal, and licensing formalities, allowing businesses to focus on their business formation rather than bureaucratic procedures. So don't hesitate to contact us if you decide to start a business in the UAE, even if it's only for friendly advice.