The Advantages and Disadvantages of Setting Up a Free Zone in Dubai

Free Zone Companies 101

Setting up a company in the U.A.E can be quite overwhelming, we know because we’ve been there! Not only are there a number of different kinds of companies, it can be hard to discern which will be ideal to your line of business and best-suited to what you are looking for.

For businessmen or women who are looking for 100% ownership of their company, their best bet is a Free Zone in one of more than 37 locations in the U.A.E. Each free zone has its own regulations specific to that area and they often benefit from easier startup, labor and immigration processes. Currently Free Zones comprise a large portion of trade that is carried out here in the U.A.E so you wouldn’t be the first to consider this kind of option! (Khaleej Times).

The Advantages of Setting Up a Free Zone Company

The advantages of setting up free zone companies in the U.A.E are plentiful. To start off with, and perhaps one of the most pronounced advantages, is that they offer 100% foreign national ownership of the firm without the need for a local sponsor or service agent. For this reason and several others, free zones are generally easier to incorporate.

There is no need for a physical office in a free zone company resulting in shorter setup time and free zone company holders can benefit from a wide array of tax benefits. If you set up a company in a U.A.E free zone, you are eligible to receive a waiver of corporate tax and exemption from personal, import and export taxes. Revenue and profit repatriation, another key concern for foreign business owners, is another benefit. Free zone companies in the U.A.E are allowed to repatriate 100% of their revenue and profits and benefit from free transfer of funds, not to mention many free zones offer long-term leasing options.

All in all, free zones offer a wide range of activities, which are ideal for international business trading whilst still affording the same rights as U.A.E. residents. Free Zone companies remain one of the best ways to attain residency in the U.A.E.

The Limitations of Setting Up a Free Zone Company

Free zone companies were set up to encourage foreign direct investment and have been doing so since their inception, however if we are looking to capture the real picture of what it is like to own one, it is important to keep in mind some of the challenges free zone company owners face as well. Although less costly to establish, one needs to be conscious of the free zone location. Places like Dubai Airport Free Zone or Jebel Ali Free Zone are indeed significantly more costly than a free zone in Ras Al Khaima for instance.

Additionally, free zones limit where you are able to do business. Whereas they permit you to trade within the free zone and internationally, they do not allow you to do so onshore without the use of service agent or distributor. Furthermore there are an array of different free zones in Dubai, each with their own particular rules and regulations; meaning it takes a good amount of research to try and understand which is most suited to your business needs.

JAFZA Offshore Companies

In November of last year, there were some additional and indeed significant changes in the regulations authorized by Jebel Ali Free Zone Authority (JAFZA). Now, a JAFZA offshore company that owns property in one of the designated freehold areas is eligible to apply to JAFZA for the residence visa of its members (shareholders and/or director).

Said offshore companies are also permitted to hold a lease of a property (to use as their registered office spaces or not), in any of the designated free hold areas in the U.A.E. and can own stake in another operating company within the U.A.E. Whereas previously offshore companies were required to appoint 2 directors to manage their affairs, this quota has been reduced to 1 director or corporate body.

Last but not least, offshore companies can now be converted into free zone companies in JAFZA via a resolution presented to the registrar. Important to note is that although these regulations have been put in place, they are still very much in the early stages in terms of implementation.

If you are unfamiliar with the rules and regulations in the U.A.E and are looking to set up a business quickly, chances are you would rather spend your time strategizing than figuring out exactly which kind of company your business needs to setup. This is where we come in!

Since our inception, we have made it our goal to familiarize ourselves with the different regulatory frameworks surrounding both onshore, offshore and free zone companies. Having doubts? Don’t hesitate to contact us on +971 4 559 0114 or info@yourpoadubai.com.

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