Business Setup in a Dubai Free Zone: Everything You Need to Know

The UAE has opened its doors to the world economy and is now a thriving hub for investors, businesspeople, and entrepreneurs from across the world. Renowned for its favorable business environment, Dubai consistently ranks among the top cities for establishing and running a business. This is primarily due to the city’s multiple free zones, which offer significant advantages such as superior business facilities and access to great talent. But what exactly are Dubai’s free zones?

This article delves into the essentials of a business setup in Dubai’s free zones - from how free zones operate to establishing a business in one. Let’s explore the benefits, procedures, and key insights to help you navigate Dubai's free zones.

What is a Dubai Free Zone?

A free zone, also known as a free trade zone, is an area of economic activity where external rules and regulations do not apply to businesses within the zone. Free zones have their own set of rules, regulations, and tax rates, wherein companies operating in the area can trade products and services with the help of foreign ownership laws and special tax systems.

While there are a growing number of businesses in Dubai, it’s not the only city in the UAE with free zones. Since the first free zone was set up in the UAE, Jebel Ali Free Zone in 1985, the number of free zone business setups in the UAE has grown tremendously. Today, the UAE has 46 free zones, with 26 located in Dubai, attracting diverse businesses from all over the world.

If you’re considering a business setup in a Dubai free zone, it’s important to understand the different types of business entities available.

Types of Business Entities in Dubai Free Zones

There are several types of business entities you can set up in free zones in Dubai and the UAE. The three primary entities that can be established in a free zone business setup are:

1. Free Zone Company (FZCO)

A Dubai Free Zone Company (FZCO) generally operates within the free zone’s boundaries and can have more than one shareholder in the company. Such entities are also known as limited liability entities.

An FZCO is mandated to employ at least one director and a secretary, to create a corporate governance-like environment. Increased shareholder participation in an FZCO also opens the door to diverse investment opportunities, collaborations, and expansion strategies.

2. Free Zone Establishment (FZE)

A Dubai Free Zone Establishment (FZE) is specifically for businesspeople wanting a simplified ownership structure - wherein a single shareholder (corporation/individual) owns the company. This means that the shareholder is entirely responsible for the company’s operations and liabilities.

Advantages of Setting Up in a Dubai Free Zone

As mentioned, free zone business setup in the UAE offers several benefits that can enhance the success and growth prospects of your business:

1. Minimal/No Corporate Tax

Businesses in UAE free zones are subject to a specific tax structure based on their status as Qualifying Free Zone Person (QFZP).

• 0% Corporate Tax: If you meet the QFZP criteria, you pay no corporate tax on qualifying income from transactions within the free zone and certain activities performed there.
• 9% Corporate Tax: Non-qualifying income is subject to a 9% corporate tax, though exceptions or relief may apply.

To be a QFZP, you must fulfill certain criteria, such as maintaining a significant presence in the UAE, generating qualifying income, and meeting other specific conditions set by the Free Zone authority. Nevertheless, if you’re operating in a free zone, you can benefit from some of the world’s lowest corporate tax rates.

2. Connectivity and Accessibility

Not only are Dubai’s free zones connected with various airports, highways, and ports, but the city itself is in a location that facilitates connection with South Asia and the MENA region. It is the perfect place for businesses looking to expand their activities globally.

3. Wide Range of Business Activities

Business setups in Dubai’s free zones, and even in UAE’s free zones, are given the freedom to conduct a wide range of business activities. This helps businesses to align their ventures with the different opportunities the market may present, while also leveraging their expertise.

Some of the most common business activities taking place in a Dubai free zone business setup include:

• Manufacturing
• Trading
• Services
• Healthcare
• Consulting
• Media
• Technology

Steps to Setting Up a Business in a Dubai Free Zone

Let’s now look at how to establish your business setup in a Dubai/UAE free zone. Here is a step-by-step guide to give you more insights into the process:

1. Initial Planning and Market Research

It is recommended to conduct your due diligence on current market trends and demands in Dubai or any other region in the UAE, as you can determine what kind of business setup would be beneficial.

2. Selecting a Business Activity and Company Structure

Conducting market research will help you narrow down the kind of business(es) you wish to set up in Dubai’s free zones. Making this decision will impact the choice of free zone and the type of license your business will require. You can also finalize the kind of company structure you want to create based on your business activity.

For example, several free zones permit a business to conduct different activities under one license. But specific business activities will require a certain kind of license. It is recommended to consult with a company formation services organization to understand the legalities of setting up your business in Dubai’s free zones.

3. Choosing the Right Free Zone Based on Your Business Activity

Selecting the correct free zone for your business setup in Dubai/UAE can greatly benefit your company in terms of new opportunities, higher revenues, and networking. Here are certain factors you should consider when selecting a free zone for your company:

Sector-Specific Free Zones

Most free zones across Dubai are sector-specific, catering to myriad industries, from finance and ICT to healthcare and maritime.

Location

If your business requires maritime/air trade, it is important to select a free zone in Dubai based on its proximity to key ports/airports/highways. This will help reduce any costs, time, and effort for the logistics and transportation of your goods.

Facilities

Whether your business setup requires a physical office setup or a proper warehouse, different free zones provide different facilities.

4. Register Your Company and Get a License

It is important to select a suitable company name that is original and adheres to the UAE regulations. Ensure that you obtain all the relevant licenses, permits, and visas to avoid legal trouble and carry out your operations smoothly. Immigration procedures need to be in place before banking facilities are available to a free zone company owner.

Register your company can be a straightforward process with the help of specialized organizations as SFM Corporate Services.

5. Open Your Corporate Bank Account

A corporate bank account for your free zone business setup in Dubai/UAE is highly recommenced for all financial transactions. At SFM Corporate Services, we can assist on finding a bank that meets your business requirements, such as fees, minimum balance requirements, service offerings, and assist you with bank account opening formalities.

Please note that certain banks will have eligibility criteria such as requiring all shareholders to have residency visas. Therefore, it is important to consider the terms & condition specific to each bank as well before finalizing your banking partner.

6. Set Up Your Business Location

After deciding the location for your business and the bank you will be working with, it is time to officially kickstart your business setup in a Dubai free zone. Freezones offer virtual addresses as well as physical solutions. However, it is important to note that you do not have the liberty to register an office anywhere in Dubai with a free zone license - you are restricted to the jurisdiction.

Throughout the business setup process, it is important to have your documentation collated to ensure a smooth application, free from any delays.

What Documents are Required for UAE Business Setup?

Providing the government and other regulatory bodies with the correct documentation is a pivotal step towards a successful free zone business setup in the UAE.

Here are the documents you will require throughout the application process:

• An application form for your business/trade license
• Certified passport copies of the relevant company personnel
• Bank account details and licenses of shareholders/partners
• Company name options (a list of three in order of preference)
• Certified proof of residential address

Other documents might be requested to finalize the process of incorporation.

What is the Cost of a Dubai Free Zone Business Setup?

The initial setup costs for your free zone business in Dubai/UAE can vary depending on various factors such as:

• License fees
• Registration costs
• Office space rentals
• and more…

To get a specific quote based on the unique requirements of your business, you can get in touch with SFM, a leading business incorporation company with 18+ years of experience. Not only do you receive more clarity on your business setup costs, but you also get expert assistance at all steps of the setup process.

SFM offers a comprehensive range of services, including company registration, incorporation services, bank account opening, tax filing, auditing, and more. SFM is the one-stop destination for all your business setup requirements and some of the features that make SFM stand out are:

• Personalized Support: SFM provides personalized support in registering your company in case you face any challenges.
• Expertise: Partnering with SFM gives you access to top experts in legal, financial, and other areas essential for running a company.
• Global Reach: SFM allows you to incorporate your new company in more than 50 top jurisdictions across the world, including free zones in Dubai.

We hope this blog has helped you understand what’s involved in setting up a business in Dubai’s free zones and how you can build a successful venture in one of the world’s leading economies. By understanding the initial setup costs and leveraging the expertise of a trusted partner like SFM, you can complete the process without any hassles. Contact us today to get started.