UAE COMPANY FORMATION / Free Zone Company Formation

Freezone Company Formation Dubai

  • International Trade is allowed and local U.A.E. trade is possible only through a local distributor
  • Office required
  • Visa provided
  • 100 % Foreign shareholding allowed and no local sponsor required
Why invest in Company within a Free Trade Zone in the UAE

The establishment of free trade zones (FTZs) in the UAE has been one of the most significantand promising initiatives taken to attract foreign investment. Dubai was the first emirate to establish a FTZ in Jebel Ali. The general benefits of being located in a FTZ are set out below:

• 100 percent foreign ownership
• No restrictions on profit repatriation
• No exchange controls
• A guarantee of no corporate and personal income taxes from set up
• Availability of offices, factory premises and warehouses
• Excellent port, airport and road transport infrastructure
• Efficient utilities and modes of communication
• No import or export duties - except from sales from FTZs into the UAE and the GCC
• No recruitment restrictions, and special assistance in obtaining work permits for
• expatriate staff

The establishment of free trade zones (FTZs) in the UAE has been one of the most significant and promising initiatives taken to attract foreign investment. Dubai Dubai has seen a dramatic rise in the number FTZs. Each zone has a focus on a particular type of industry. Some of the main names names and industry focus of the many free zones within Dubai are:

• Jebel Ali Free Zone (JAFZA): manufacturing,heavy industry and distribution. It also encompasses:
• Dubai Cars and Automotive Zone: reexport of automobiles
• Dubai Gold and Diamond Park: dealing in precious metals and stones
• Dubai Airport Freezone: light industry, assembly, distribution, service industries

Dubai International Financial Centre (DIFC) – This free zone focuses on the financial institutions and financial service firms and aims to establish the UAE as a leading financial centre. This zone is subject to a comprehensive regulatory regime that follows international standards. The regulatory authority in the DIFC is the Dubai Financial Services Authority.

Other FTZs in Dubai include Dubai Aid and Humanitarian City, Dubai Techno Park, Dubai Auto Parts City, Dubai Textile City, Heavy Equipment and Trucks Free Zone, Dubai Flower Centre Free Zone, Dubai Carpet Free Zone, and Dubai Outsource Zone.

The main advantages of setting up in one of the free zones in the UAE are as follows:
  • 100 percent foreign ownership is allowed
  • Guarantee for 15-50 years against the future imposition of corporation tax. It is not clear  whether
  • the guarantee would provide exemption against an imposition of VAT as well
  • import of goods duty free, provided the goods are not supplied to the local market
  • streamlined procedures: all formalities are typically dealt with through the free zone authorities
  • instead of the various government departments
  • no restrictions on hiring expatriates
The main disadvantages as compared to operating as a local business are that there is higher rent than outside the free zones and it is not possible to supply goods directly to the local market. Goods can be supplied to the local market through a local commercial agency which has to be wholly owned by a UAE national and after paying the import duty, usually 5 percent. Note that the practice is to allow the provision of services through a free zone entity to the local market as long a significant proportion of the turnover is realized abroad.

The free zones each have their own free zone authority. They are profit making entities. Their main source of income derives from renting office space, collecting license fees, and providing services to the companies operating in the free zone. All share the features outlined above but differ along the following lines:
  • focus of the free zone company formation: free zones often focus on attracting businesses from a particular sector 
  • Although there is considerable flexibility. Some free zones do not have a particular focus
  • office rent: rents outside Dubai are significantly lower
  • minimum office space required to be rented
  • support facilities provided by the free zone
  • annual trade license fees
  • paperwork involved in forming the business
  • capital requirement
  • number of visas allocated per square metre office space
In all free zones, financial statements need to be submitted to the fee zone authorities annually.

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