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UAE has outdone many of its global competitors in providing prospective business arrangements. It has granted various relaxations and concessions to create pleasant grounds for entrepreneurs to start their business. 

Liberalization and globalization of the economy has broken the barriers of trade. Most of the countries in the world have mobility of labor and goods. Businessmen and entrepreneurs are leaving their homeland to find new destinations. The UAE government has utilized this golden rationale of dynamic business. The provisions which they have designed for expatriates have encouraged flocks of emerging and established businesses to explore their niche sector in the seven Emirates of the UAE.  It has ranked within the top 30 in “most networked countries”.

UAE has recently in September 2021 eased rules regarding residency of expatriates to attract foreign investment. They have introduced friendly visa policies for employees as well as employers. From this we can see that the government is very flexible and attempting to create a lenient business environment.

What is a free zone?

A free-trade zone in UAE is considered as an economic or trade zone where the laws of trade are different from the rest of the economic geographical area of the country. Free zone is promoted as a special economic zone (SEZ).The main purpose of this zone is to attract foreign investors so that they come and directly invest in the country.

The employment opportunities, development and trade balance of a country are boosted .The investors enjoy several benefits if they trade in free zones. In the UAE, there are more than 40 Free-Trade zones where expatriates reap the benefits of tax holidays, liberal customs duties and labor policies.

Benefits of Setting Up a Business in the UAE Free Zones

UAE poses a unique constraint on ownership of business in Mainland mandating to provide 51% ownership to a local business associate. The division doesn’t impress everyone.  To expand this ownership control, the UAE government has chalked out specific free trade zones where owners will enjoy cost effective opportunities. We have discussed the merits below:

• Complete ownership

In the free trade zone, the UAE government has facilitated for 100% of ownership of their business for foreigner investors. There is no need for a local partner. The full control helps them to make autonomous decisions and reap full advantages out of them.

• Relief from personal income tax and corporate tax

Tax exemption is designed by the UAE government to bolster business and reduce the tax liabilities. In UAE free zones, business owners do not need to pay personal income tax and corporate tax.

• No import and export duties

The custom duty is not applicable for industries in UAE free zones. Goods can be imported and exported free of charge.  Absence of duties makes business cheaper.

• Full repatriation of gains and capitals

The free zone companies are authorized to send back their 100% profits to their own country. They are not obliged to share their incomes. There is no control of foreign exchanges.

• UAE residence visa grant for three years

The concept of permanent residency is invalid for foreigners. Only one way to stay in the UAE is to keep renewing visas at intervals. Initially, residence visas are provided for 3 years to foreign entities and they can live forever or till the time required by extending the same. You will get access to a visa once your business is registered.  The employees your organization will be hiring will also get similar visa facilities.

• No rigid employment policies

You can appoint laborers to experts from your country as well as other countries. The government is liberal regarding labor laws and recruitment conditions. They do not  force  firms in free zones to provide employment to local people.

• Flourishing construction and real estate sector can set up your business in the blink of an eye

The establishment of physical space for offices, warehouses and others is easy owing to many construction and real estate companies. They provide ample options of properties to lease or rent. You can select them at competitive rates.

The above mentioned benefits can ace up your business in UAE.

Steps for UAE freezone company formation

Once you are done resolving to set up business in the UAE, you will have to go through paperworks. It has two parts: one is pre approval stage and the second one is post approval stage.

• Type of legal entity you should choose to start a business in UAE free zone

Choosing an appropriate legal entity for your business is essential.  You will have to adhere to the legal structures offered by the UAE government depending on the industry you are setting up. It affects the ownership structure, assets, tax payment and liability of debts.

In the Free Zone, you can set up business according to legal structures, namely Free Zone Establishment (Sole proprietorship), Free Zone Corporation (civil company) and branch offices. In some free zones only the Free Zone Limited Liability Company (FZ-LLC) structure is available for FZE and FZC.

• Choose a trade name

Once you have chosen the legal entity of your business, you will have to select a name for your trade. The UAE  has stringent rules regarding naming a business. The name should not be indecent and inappropriate. There shouldn’t be any reference to Allah  or any other gods and deities. You should use full form in name.  You can name your company on your name. The name should be relevant and   should not  misguide people on the nature of your business. You cannot put the name of any geographical location in your business. No indication of your political affiliation should be there in your trade name.

• Apply for a business license

Business licenses are permission papers to run a business. The Free Zone Authority authorizes businesses to own  commercial or trade ,professional or service and  industrial licenses.  You are required to renew the license every year. The disadvantage is that you can carry out business only in free zones. To do business in the mainland you need a local representative.

Companies involved in import and export are given commercial licenses. Those who will engage in the production and manufacturing industry will get industrial license. The ones delivering professional services are entitled to a professional license.

• Registering company in UAE

After you have selected your business legal structure, decided the trade name and applied for a  business license then you will have to apply for registration from different government agencies. 

Once you get the approval from Free Zone Authority you will have to undergo the following processes:

• Choose an office space

A physical place is required to run your business. You can only lease or rent it after you are approved by the authorities. The choice of business place is important. It enables you to flourish, work in the  best conditions and keep a watch on your competitors. Accessibility and infrastructural facilities should be the priority.

• Documents Required to Set Up a Business in the UAE

The documents which can help you to set up business in the free trade zones are  Passport, Residence Visa, Address proof, Identity card, No Objection Certificate and ownership certificate. Apart from the above mentioned you will be required to submit the Free Zone Authority’s Approval Certificate, Initial approval  Approval certificate of the external departments depending on the sector of your business, Certificate of Trade Name reservation, Tenancy contract with your landlord or property owner and Ejari certificate on submission of your tenancy contract.

List of free zone in UAE

The free trade zones in Abu Dhabi are:

1. Khalifa Port and Industrial Zone
2. Masdar City Free Zone
3. Industrial City of Abu Dhabi
4. Higher Corporation for Specialized Economic Zones
5. Abu Dhabi Global Markets
6. Abu Dhabi Airport Free Zone

In Dubai you can set business in the following free zones:

1. Dubai Airport Free Zone
2. Jebel Ali Free Zone
3. Dubai Biotechnology & Research Park
4. Dubai Gold and Diamond Park
5. Dubai Auto Zone
6. Dubai Design District
7. Dubai International Financial Centre
8. Dubai Car and Automotive City Free Zone
9. Dubai Flower Center
10. Dubai Internet City
11. Dubai Science Park
12. Dubai Healthcare City
13. Dubai Industrial City
14. Dubai Silicon Oasis
15. Dubai South or DWC
16. International Humanitarian City
17. Dubai Knowledge Village
18. Dubai Logistics City
19. Dubai International Academic City
20. Dubai Media City
21. Dubai Studio City
22. Dubai Production City
23. Dubai Technology and Media Free Zone
24. Dubai Multi Commodities Centre
25. Dubai Textile Village
26. International Media Production Zone
27. Dubai Outsource Zone
28. Dubai Techno Park
29. International Free Zone Authority

Sharjah hosts:

1. Sharjah Media City Free Zone
2. Sharjah Publishing City Free Zone
3. Hamriyah Free Zone
4. Sharjah Airport International Free Zone

In Ajman free zone are:

1. Ajman Media City Free Zone
2. Ajman Free Zone

Free zone in Umm Al Quwain:

1. Umm Al Quwain Free Trade Zone

In Ras Al Khaimah free zones are in:

1. Ras Al Khaimah Economic Zone

Fujairah has the following free zones:

1. Fujairah Free Zone
2. Fujairah Creative City

Disadvantages of Free zones

There are always two sides of a coin. If you are availing certain advantages , then you are surely to face inconveniences too. Though the liberal trade practices in UAE Freezone may attract you, still you may face hardships and limitations. The most prominent ones are:

1. You can conduct business in only the Freezone. You cannot venture out or expand your business to the mainlands of the UAE. The limitation of business areas is a problem for businesses.
2. You have to depend upon a local link to carry out business.
3. Each  freezone in the UAE is dedicated to a particular trade. You cannot do trading in zones kept for consultancy.
4. The rents are higher in the free zones.

Frequently asked questions

What is the cheapest Freezone in the UAE?

Below is list of the free zones which provide comparatively low-cost benefits :

• Ajman Media City (AMC) Free Zone in Ajman

A prospective free zone established in Ajman is Ajman Media City which is emerging as a cost-effective destination to set up business. It is developing at a galloping rate. The process of business establishment is free from complexity.

AMC hosts several small and medium enterprises. Media, Consultancy, Entertainment and E-Commerce business can be set up. Here you can register your company without physical spaces or you can share workplaces with other companies.

Trade license at Ajman Media City starts with AED 8,500/-, making it one of the cheapest free zones. The process of acquiring a license takes a minimum 2 days. One can do two or more businesses with one trade license.

• Sharjah Media City Free Zone

SHAMS intends to provide a world-class infrastructure for creative business endeavors.

Here businessmen can set up offices remotely without being physically present in Sharjah. The registration process and trade license issuing process take only a few days.

The place enjoys all the benefits provided under free zones. SHAMS provides opportunities to businesses of all sizes along with personalized support. A well knit business ecosystem has been formed. Restaurants, media, trading companies, social media companies, etc can function here.

Companies can be set up from AED 11,500/-  in Sharjah Media City.

• Fujairah Creative City

Fujairah creative city promotes businesses providing professional services. Trading activities are not allowed. Here too you can set up your business remotely. You can apply for many visas here at low cost.

If you are a professional willing to provide education or set up consultancy, then Fujairah is the best option for you. Businesses like Publishing houses, entertainment and music industry, media services, event management, Information Technologies etc can be started here.

The cost of a license starts from AED 12,000/- and visa from AED 11,000/-. Fujairah is an affordable place to start a business.

• International Free Zone Dubai

Dubai is one of the most prosperous emirates of UAE and amidst it International Free Zone of Dubai offers you the best spot to start business at low investment. 

As the name itself has the word “International” we are ushered into facilities which match with international criteria. Manufacturing, trading and professional businesses can be done with ease.

The cost of a license starts from AED 12,000/-.

• Ras Al Khaimah Economic Zone

The RAKEZ zone is another brilliant budget option to start business. It is known for warehouses of all sizes. All types of business can be set up here including commercial, trading and professional services.

There are 4 segregated parts in this zone. One is a business park, second is an industrial area, third one is for academics and fourth one is for technology.

They help businesses to get  international exposure. The cost of  the license begins from AED 8,000/-.

• Umm Al Quwain Free Trade Zone

Umm Al Quwain Free Trade Zone (UAQ FTZ) is located in Umm Al Quwain, a friendly, progressive and prosperous emirate with modern infrastructure. Renowned for its desert landscape, it is also a popular leisure destination within the United Arab Emirates (UAE) and is located just 45km from Dubai.

Umm Al Quwain Free Trade Zone (UAQ FTZ) is located in Umm Al Quwain, a friendly, progressive and prosperous emirate with modern infrastructure. Renowned for its desert landscape and unique flora and fauna, it is also a popular leisure destination within the United Arab Emirates (UAE) and is located just 45km from Dubai. 

They offer a wide range of licenses such as Commercial, Consultancy, Service, Industrial, Freelance etc. and you can choose as per your requirement. The cost of the license starts from AED 8,000/-.

• Sharjah Publishing City (SPC) Free Zone

SPC Free Zone is a strategically located, easy to access free zone in the emirates of Sharjah. SPC free zone provides all the infrastructure and services, along with a business friendly environment to successfully operate your company and contribute to a thriving local and regional ecosystem. SPCFZ operated out of one of the most central and accessible developments in Sharjah.

SPC Free Zone provides many types of facilities including offices (furnished & unfurnished), warehouses, storage space, and shell & core with offerings such as meeting rooms, co-working spaces, and cafe. The cost of a license starts from as low as AED 5,750/-.

How much does it cost to start a business in UAE Freezone?

The cost of running a business incurs expenses on licenses, visas, renting space and the capital to run a business.

Registration Fees: The registration fee is one time cost and is around AED 10,000/-  to AED 50,000 depending on business.

License Fees: The license cost is the yearly cost and it depends on the type of license. License costs start from AED 6,000/-  For more discounts you can renew it for 2 years to 5 years together, but discount is subject to approval for respective free zone authority

Visa Cost: The cost of visa per person varies around AED 3,500/- AED to AED 7,000. Visa will be valid for 2 to 3 years, depending on the free zone.

Office Rent: The rent of office space depends on if you are sharing your office space or owning the whole area. Flexi office rent star from AED 10,000/-

Initial Capital: The capital requirement varies from one freezone to another. You may require a minimum capital.

Apart from all these costs, you need capital to buy machinery, materials and goods to run your business

What are the types of businesses I can do in a free zone?

There are ample business ideas to pursue in the free trade zones.

• Publishing fiction and non fiction books, academic books, journals and magazines.
• Shows on television and radio can be broadcast.
• Media marketing companies.
• Online business
• Consultancy.
• Advertisement company.
• Filmmaking and music companies.
• Software companies.
• Personal relation companies.
• Freelancing company.
• Agencies of brands.
• Developing websites.
• Writing e-books.
• Event management.
• Non profit organizations.

Wrap up

The gains and risks of doing business in the UAE free zones are equally weighted. You can overcome the difficulties once you are on board. Keeping in consideration the easing of business policies by the UAE government you will get assistance from various government institutions and consultancy. 

It can be worth giving a try to set up your business in free zones given the relaxations you get.