Last Updated on May 20, 2021 by MoneyVisual
The UAE has long been a highly attractive destination for entrepreneurs. Its geographical location and excellent transport links have made it an international hub for business and finance.
In addition, the UAE government has invested heavily in infrastructure and has been consistently committed to nurturing business through policy. The nation’s business ecosystem continues to flourish.
An important part of the UAE’s growth strategy is the creation of free zones in Dubai, Abu Dhabi and across the other Emirates. These make the UAE an especially attractive and welcoming place for international business.
Read on to find everything you need to know about the UAE free zones, how they might benefit your business, and how to begin the process of setting up a business in the UAE.
1. What is a Free Zone?
A free zone, often also referred to as a free trade zone, is a geographic area where specific goods or services are traded. Such areas are designed to benefit the businesses that choose to operate within them.
They may, for example, offer preferential tax or customs rates. As well as financial benefits, ease of setup is often a factor. A foreign-owned business may be able to operate in a free zone but not on the mainland.
UAE free zones frequently cater to certain business types. A well-known example is Dubai Healthcare City, where medical and health services have been able to flourish.
2. Where are the Free Zones in the UAE?
There are more than 40 free zones throughout the UAE, with more under construction.
Over 25 of these are in Dubai. There are several more in each of Abu Dhabi, Ras Al Khaimah and Sharjah. The remaining few are split between Ajman, Umm Al Quwain and Fujairah.
3. How Do free Zones Work?
Free zones are designed to support key industries. Many of the zones have been created with first-class infrastructures to cater to that industry and boast state-of-the-art facilities. They are also built to attract foreign businesses and thus offer excellent incentives.
UAE free zones cater to many business sectors. For example, there are free zones especially for the major airports and seaports, and for businesses specializing in media, internet, textiles, science and technology, and many others.
Because each free zone is customized for certain industries or business types, the specific requirements and advertised benefits of the zones vary. However, here’s a summary of what you might expect from a UAE free zone:
- 100% import and export tax exemption
- 100% foreign ownership possible
- Tax holidays of 15-50 years
- 100% repatriation of capital and profits
4. What are the Main Benefits?
Aside from the benefits listed just above, the free zones also offer:
- Access to specially designed facilities, logistics and infrastructure
- A large, international potential workforce attracted to life in the UAE
- The benefit of being surrounded by businesses in related fields
- Easy setup procedures
- Single window clearance for administration
- Supportive free zone authorities
- A proven track record of boosting economic growth and bolstering international business
5. Are There Any Restrictions?
There are very few. The most significant restriction is that free zone businesses must only operate within their free zone (i.e., they may not expand into other markets).
6. Which is the Best UAE Free Zone?
This is a frequently asked question, but one that is difficult to answer immediately. Once you have seen the full list of free zones, there may be several suited to your area of business. The geographical location of the zone will no doubt play a part in your decision.
Popular and highly regarded free zones include but are not limited to Dubai South, Sharjah Media City, and Ajman Free Zone. DMCC (Dubai Multi Commodities Center) is especially well thought of; it has won The Financial Times’ “Global Free Zone of the Year” award four times.
Choosing the right free zone is not an easy task, so it is best to seek help from UAE-based providers of business setup services who will be in an ideal position to offer their advice.
7. What is the Difference Between Setting Up a Business on Mainland UAE and in a Free Zone?
Setting up a business on the UAE mainland is very different. Like the free zones, operating on the mainland brings benefits (in particular, corporation tax exemption).
Mainland businesses are free to trade anywhere in the UAE and expand their business into other markets, which is not possible if a business is set up in a free zone. If your business meets the criteria for setting up on the mainland, it will likely be an attractive prospect. Again, it is best to speak to a business setup service that can give the latest information that is most relevant to your situation.
8. How Do I Set Up Business in a UAE Free Zone?
It’s advisable to seek professional services to aid your business setup in the UAE. However, here’s an overview of the main steps that need to be taken.
Evaluation and recommendation
A professional service would first evaluate various factors, such as the type of business you are looking to set up, the capital needed, and the cost of setup. This would lead to them being able to make a recommendation of the most suitable free zone.
Once the free zone is decided upon, the administrative steps can begin.
Ensure your business name is compliant with UAE law
The UAE has strict rules when it comes to business names. It must not be offensive, or contain any religious references, or make reference to other well-known organizations. Yet, you will want to ensure it aligns with your branding strategy. A company formation specialist can help ensure your name is fully compliant with the laws.
Complete the paperwork
Setting up shop in a UAE free zone requires relatively little paperwork. You need to complete an application form and collect some standard documents, such as passports of shareholders, to prove your identity.
Banking set up
Once your application is approved, you can open a bank account to begin trading.
The final step before you can open for business is to make sure that all personnel have relevant visas. You’ll need to complete application forms and liaise with the relevant authorities.
All the steps above can be led by a company formation specialist, who will ensure that the whole process of setting up in a UAE free zone is seamless and stress-free. Begin making enquiries today and you could be trading in one of these lucrative areas very soon.
Naresh Manchanda is a Partner at MBG Corporate Services, an international organization supporting clients across Asia, Europe and the Middle East and providing sustainable solutions and strategies that drive business transformation. Established in 2002 and headquartered in Singapore, MBG is a 450-strong member team that operates out of Europe, the Middle East and Asia, providing Legal, Risk, M&A, Tax, Strategy, Technology and Audit Services.