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What is a free zone and why should you consider one?

Dec 23, 2021 | Free Zones

The UAE has long been an attractive destination for entrepreneurs the world over. With a noticeable shift away from oil trade, investors in Dubai have been searching for alternative business activities and potential income opportunities. Luckily, there’s a major reason why so many flock to Dubai and the UAE’s shores to conduct business – free zones. So, what is a free zone? Read on to find out what a free zone is and how it works in the Dubai Media City!

Within the UAE, there’s incredible benefits that keen working professionals can take advantage. The United Arab Emirates economy is thriving, with more scope for investment and income sources than ever before. It’s no surprise why this place has such immense international appeal. In the Dubai Media City, free zones in Dubai and free zone companies are dominating many industries.

This article explores exactly what is a free zone, information on UAE free zones, the legal framework, regulations as well a number of available advantages. We also tell you all the befits a free zone has to offer, for free zone companies as well as for entrepreneurs using a Dubai free zone. Even just for those wanting to know more about free zones in Dubai. This article has everything to do with any free zone company questions and answers. So read on to find out everything you need to know about free zone companies in the Dubai Media City!

A business investors meeting in Sharjah or Dubai

What is a Free Zone?

Free zones are economic areas where goods and services can be traded. These regions are also known as free trade zones or a free zone authority. Free trade zones attract 0% tax rates, preferential customs duty rates and 100% import and export tax exemption.

Free zones are particularly popular with privacy-conscious entrepreneurs. This is because there’s 100% foreign ownership with no open directory of company details. 100% foreign ownership means that sensitive corporate information such as shareholder details are never disclosed to the public.

Each industry provides investors and businesspeople with great access to bustling areas and services surrounding Dubai. Within each free zone and its authority, multiple corporate activities can be undertaken. For instance, infrastructure, media, education, construction and retail are among some of the companies that can be established within free zones. It is definitely worth utilising the free zones in Dubai for your business needs. 

When considering a company formation that is free zone dedicated and located in the Middle East, look no further as you have found the Dubai internet city! Free zones in Dubai are prevalent and heavily used and easily accessed, making a company formation that is free zone oriented as easily obtained venture for your business.Free zones are a fantastic tool for your business in the south asian region of the Middle East.

History of The Free Zone

Free zones were rolled out to boost international business profits and endorse company formation in the emirates region. By offering benefits such as 100% foreign company ownership, both travellers and locals seized a profitable opportunity to make a name for themselves. There are currently 45 free zones across the United Arab Emirates. Included are the popular emirates Fujairah, Sharjah, Umm Al Quwain and Ras Al Khaimah.

Over the years, the UAE’s free zones have evolved to offer ever-increasing advantages to the businesses within them. Free zones help integrate the city and emirate regions and are governed by the International Free Zone Authority (IFZA). Companies outside of the free zone can access and trade with international firms. 

Many free zones or authorities cater to specific industries or business types. Also, free zones have different and specialised offerings. For example, in the capital Dubai Healthcare City serves those in the healthcare industry. The Fujairah zone authority is a popular choice for small businesses. Comparatively, others such as the JAFZA Free Zone Authority is directly linked to the largest port in the region and is therefore favoured by those involved in international trade.

The Dubai International Financial Centre (DIFC) is in the centre of Dubai city and is a unique free zone. The Dubai International Financial Centre is known as a prestigious financial district in the Middle East and nearby countries. The DIFC has its own jurisdictions governed by English Common Law framework.

So now you know a bit more on what is a Dubai free zone. Now, learn why a Dubai free zone company setup is such an attractive option, and what could it mean for your business?

What Is A Free Zone - Dubai or Fujairah Emirate Free Trade Zones office space

Why set up in a free zone?

After getting a grip on what is a Dubai free zone, there’s plenty of reasons as to why you should set up in one. Furthermore, setting up a company or or freelancing in the UAE free zones is easily done. A free zone company in a Dubai free zone or within a Dubai multi commodities centre can be a fantastic business venture in the South Asia region. With various trade sectors to operate from, the Dubai and UAE economy is streaming with financial benefits. So why set up a free zone company using free zones in Dubai? Let’s keep reading about what Dubai free zones have to offer.

The country has low tax and is ideally located in the heart of the world’s largest emerging markets. Import and export businesses experience healthy profits due to the region’s close proximity to Africa and Europe. What’s more, the UAE government is committed to nurturing business growth.

Easy Setup

The set up process within a free zone authority is incredibly straightforward. The precise way forward will depend on your business activity and chosen zone. In many cases, the only main requirement is to provide some basic documentation. Typical items needed includes a passport, business documents and professional credentials. The whole process often takes a week or two. Many free zones also offer flexi-desk and virtual packages. This allows freelancers and entrepreneurs to make use of the free zone address and facilities on an ad-hoc basis. A Dubai free zone is a fantastic way to help you set up your business in the Dubai Internet City.

Tax and Duty

This is perhaps the most compelling reason to choose a free zone: tax exemptions. Set up in a free zone and as well as benefiting from 0% corporate and personal tax, your occupation will also be exempt from VAT. Currently, VAT is set at 5% and applies to any goods or services in Dubai and the region. Free Zones also permit full repatriation of profits and capital. 

Further to this, the fact that free zone businesses are exempt from import and export tax means they can trade with no currency restrictions.

Set up in a free zone and benefit from corporate and personal tax exemptions. What’s more, your business will also be exempt from VAT, currently at 5%.

Foreign Ownership

Another major plus to setting up in a free zone is foreign company ownership. Most entrepreneurs from overseas wanting to set up in the UAE mainland must work with a local partner to conduct their line of work. In the UAE’s free zones, this ruling does not apply. Business holders retain 100% ownership once set up in a free zone establishment.

Trading within the UAE

One of the regulations that UAE free zone companies must abide by, is the prohibition of direct trade within the local market of the UAE. Fortunately, this hurdle can be readily overcome, once meaningful networks have been created with investors in your industry.

A great option is to access and collaborate with a locally appointed distributor. They can offer up your goods and services to market in return for a fee. Alternatively, it’s possible to establish your business, then open branch offices of your free zone company throughout the Dubai and the Emirates at a later date. These satellite offices can be used to market the offerings within the United Arab Emirates mainland.

Ongoing Support

Free zone authorities are available to offer support services during the set up procedure and beyond. Most free zones offer assistance with applying for visas for both shareholders and any applicable dependants, including spouses or domestic staff.

Many also assist with opening corporate bank accounts, advising on the best institutions to suit your needs. In terms of ongoing support, it is not unusual for an individual free trade zone to offer professional advice and networking services. Additionally, several zones offer access to startup hubs and growth initiatives to help new businesses get up and running.

Ras Al Khaimah and Umm Al Quwain free zone investors meeting in Dubai

What is a free zone and how to get set up?

Interested in the benefits of doing business in a free zone? There’s more good news, the process couldn’t be simpler. Here’s five easy steps to get going on your professional enterprise:

Step 1: Choose your business activity

There are hundreds of business activities to choose from in Dubai and the entire UAE. In fact, it’s common for companies to select multiple activities under one license. Your business activities will help to determine both the cost of your licence and the free zone that best suits your needs. Once an appropriate business activity is established, the next step is about company names and branding.

Step 2: Finalise your company name

Deciding on a company name can be a challenge anywhere in the world. Importantly, the UAE has specific rules regarding naming conventions. Naming your company, therefore, is a task to tick off as early as possible. There are a few things to keep in mind with regard to choosing a company name:

  • Avoid using offensive language
  • Religious references are forbidden
  • Other references to any known organisations (i.e: ‘FBI’ or ‘Mafia’) are prohibited

To ensure proper compliance and following the necessary naming requirements, it’s wise to engage the right help. Working with a professional Dubai company can help decide on a compliant name, check its availability and iron out any other related issues. It’s worthwhile meeting the necessary regulations, to curb any problems later on.

Step 3: Apply and submit your documents

In many cases, setting up in a UAE free zone usually only requires a few standard documents. Among the usual required documents are a completed application form and additional supporting information. Paperwork required includes your shareholder passport copies and contact information, email address and phone number. Some free zones may also require a business plan.

Again, engaging with a business specialist is a good idea at this stage. Ensuring everything is in order and in the hands of professionals before making your application will avoid unnecessary delays. Then, once you’ve provided all the necessary documents and information, you can proceed with submission.  

It’s a good idea to collaborate with a business specialist at this stage. They’ll ensure all documents are in order to avoid unnecessary delays.

Step 4: Licence notification and opening bank account

Next, you’ll be issued with a licence. Once you’ve received an approved licence, collect your corporate documents and get working. With these documents in hand, you can open your corporate bank account and start operations. The chosen free zone can usually help with finding suitable banks that meet your individual requirements and provide a full suite of financial services. Choosing a corporate bank account is and important step in the business set up process. Alternatively, it’s perfectly fine to approach any financial institution on your own.

Step 5: Visa processing

The final step in the business setup process is immigration and visa processing. A free zone authority representative or a company setup specialist can manage this process on your behalf. A company specialist can provide professional services which take the stress out of the entire process. Conveniently, they can liaise with the right government departments and authorities to expedite your visa approval.

Office employees working at computers in various free zones in Dubai

What about freelancing in a free zone authority?

Looking to create that elusive perfect work-life balance dream in Dubai or anywhere in the United Arab Emirates?

Beyond Dubai South, it’s now even easier to establish a career as a freelancer in the UAE. Conveniently, many free zones offer freelance licence packages at affordable costs. These permits allow entrepreneurs to operate businesses as sole practitioners under various trade sectors. Also, plenty of free zones cater to Flexi desk workspace requirements for added flexibility and convenience.

Many Dubai industries are booming with plenty of business activities. Some of these industries include media, health and fitness, infrastructure, IT and software development and graphic design. Design your ideal life with great work flexibility and the freedom to entertain various income opportunities. 

What Is A Free Zone - Dubai South or ras al khaimah Free Trade Zone

So, still wondering about free trade zones?

Start trading from a UAE free zone and reap all the benefits that go with it. If building an enterprise of your own sounds enticing, we’re here to help. Whether it’s an entrepreneurial dream or a large-scale endeavour, start today in a Dubai free zone.

Setting up your own business has never been easier. Virtuzone Dubai is a comprehensive professional service, catering to the requirements of all corporate activities. For more information about forming a company in Dubai and the UAE mainland or more information on what is a free zone, contact us today. Please call us on +971 4 457 8200, send an email to the following email address: info@vz.ae or click here. 

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