John Smith
by on April 16, 2021
The United Arab Emirates has about 40 Free Zones operating across its seven emirates, and many are under construction. Business setup Free Zones in UAE are designed keeping the commercial categories in mind to meet their specific needs. Even the trade license offered for these zones are based on the categories available, and only companies are dealing in those categories.

The major factor that encourages businesses to open offices in UAE’s free zones is that there is no restriction on foreign ownership, and companies are governed by an independent Free Zone Authority (FZA). The FZA is also responsible for issuing licenses for operations and regulating the business activities of businesses within the Free Trade Zone.

Today the United Arab Emirates has emerged as a global business hub and is seen as one of the ideal places to establish business or a representative office. There are around 40 different Free Zones in the UAE, so finding out the one that is best to conduct business is a difficult task.

The UAE is now a major business hub and ideal for setting up a business or a representative office, and there are now over 40 different “Free Trade Zones” in the UAE, so identifying the best Free Zone through which to conduct business in the region can be a tedious task. It is also a common misconception that a Free Zone Company is an offshore company. However, despite their similarities, they do also have very differing characteristics.

In addition to enabling shareholders, directors, and employees to obtain residency visas in the UAE, the benefits of a Free Zone include:

Free Trade Zone Benefits

● 100% foreign ownership (no requirement for a local partner/sponsor);
● 100% repatriation of capital and profits;
● 100% corporate and personal income tax exemption;
● Absence of currency restrictions;
● Wide variety of licensable activities;
● Abundant and inexpensive energy;
● Modern, efficient communications;
● Logistic efficiencies due to business cluster effect;
● Serviced desks and offices for SMEs and start-ups;
● Excellent support services.

The nature of the business activity that you intend to carry out will have a big influence on selecting the Free Zone to meet your requirements.

The principal Free Zones and their license activities include:

● Dubai Multi Commodities Centre (DMCC) – Commodities Trade and Exchanges;
● Jebel Ali Free Zone (JAFZA) – Trading, General Trading, Service, Logistics and Industrial;
● Dubai International Financial Centre (DIFC) – Banking, Financial Services, and Legal;
● Dubai World Central (DWC) – Aviation, Logistics, Light industry, and Ancillary Services;
● Dubai Knowledge Park (DKP) – Human Resources Management, Training, and Personal Development;
● Dubai Internet City (DIC) – Internet and Communications Technology;
● Dubai Media City (DMC) – Media related activities;
● Dubai Silicon Oasis (DSO) – Information Technology, Telecom, Electronic, and Engineering
● Dubai Healthcare City (DHCC) – Healthcare, Medical Education and Research, Pharmaceuticals and Medical Equipment;
● Ras Al-Khaimah (RAK) – Trading, General Trading, Service, Industrial, and Educational;
● Fujairah Creative City (FCC) – Media, Consulting, Communications, Design, and Technology.

Requirements for Free Zone Business Setup

Investors can either register a new company in the form of a Free Zone Establishment (FZE) or a Free Zone Company (FZC) – an FZE form has one shareholder and an FZC form has two or more shareholders – or simply establishes a branch or representative office of their existing or parent company based within the UAE or in abroad. An FZE (Free Zone Establishment ) or FZC (Free Zone Company ) is a limited liability company (LLC) governed by the rules and regulations of the Free Zone in which it is established. The provisions of the UAE Commercial Companies Law (CCL) do not apply.

To begin the process of setting up a Free Zone Company formation in UAE, we will require the following documentation and due diligence from all shareholders/directors of the proposed new company:

● Certified Passport Copy and UAE Visa/UAE entry stamp (if non-resident)
● 2 x Proofs of Address (dated within three months)
● Bank or Professional Reference Letter
● Curriculum Vitae (summary of professional history)
● Company Application Form (which we will provide)

Please note that some Free Zones businesses may request a detailed business plan, depending on the nature of business or activity of the proposed by new company. Sovereign has a variety of templates in order to assist you.

Once a legal presence has been established in a Free Zone, the business will need to lease premises or land and acquire an operating license from the Free Zone Authority (FZA). Different types of licenses apply in the different types of free zone. Companies with trade and industrial licenses can only conduct business within the Free Zone in Dubai or abroad. To sell products in the UAE, an official UAE agent is required, and a joint venture needs to be formed.
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