A free zone company in the UAE is an entity incorporated within a designated economic zone known as a free zone. These zones are established to promote foreign investment by offering various incentives and benefits, such as tax exemptions, 100% foreign ownership, and streamlined business processes. Free zone companies operate under specific regulations and are distinct from mainland UAE companies, which require local sponsorship and adhere to different legal and financial frameworks.
Types
There are two main types of freezone companies in the UAE:
Free Zone Establishment (FZE)
Allows a single shareholder, who can be an individual or a corporate entity, to establish a company.
Free Zone Company (FZCO)
Permits multiple shareholders (individuals or corporate entities) to establish a company, offering more flexibility in ownership structure.
Benefits
Tax Benefits
Exemption from corporate and personal income taxes for a specified period.
Full Repatriation of Capital and Profits
Investors can repatriate all capital and profits outside the UAE without restrictions.
No Currency Restrictions
Free movement of currency without restrictions
Simplified Import and Export Procedures
Access to simplified customs regulations and procedures.
100% Foreign Ownership
Freezone companies allow for 100% foreign ownership, which is attractive for international investors.
Tax Incentives
Most free zones offer tax exemptions or concessions on corporate and personal income taxes.
Ease of Doing Business
Streamlined processes for licensing, permits, and visas make it easier to operate within the free zones.
Access to Infrastructure
Free zones often provide modern infrastructure, business support services, and logistical advantages.
Process
Additional Considerations
Bank Account Opening
Arrange for a corporate bank account in a UAE bank to facilitate business transactions.
Renewals and Compliance:
Ensure timely renewal of licenses and compliance with ongoing regulatory requirements of the free zone authority.
Each free zone may have specific procedures and additional requirements, so it’s advisable to consult with a business setup consultant or legal advisor familiar with the chosen free zone. This ensures smooth navigation of the setup process and compliance with UAE regulations.
Documents Required
Setting up a freezone company typically requires the following documents:
- Passport copies of shareholders and directors.
- Business plan outlining proposed activities and financial projections.
- Application forms provided by the chosen free zone authority.
- Proof of address for shareholders and directors.
- Memorandum and Articles of Association (MOA and AOA) signed by shareholders.
- No Objection Certificate (NOC) if transferring from another UAE sponsor.
Difference Between Freezone & Mainland Companies
The timeframe for establishing a business in a UAE free zone can vary based on factors such as the chosen free zone, completeness of documentation, and the complexity of the business activities. Typically, it ranges from a few days to a few weeks.
The main differences between a freezone company and a mainland company in Dubai, UAE, lie in ownership requirements, operational flexibility, and regulatory frameworks. Here’s a comparison to help understand which might be best for setting up a business:
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Freezone
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Mainland
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Ownership
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Allows 100% foreign ownership, meaning non-UAE nationals can own the entire company without the need for a local partner or sponsor.
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Requires a local sponsor (UAE national or a company wholly owned by UAE nationals) who must hold at least 51% of the shares. This applies unless the company falls under specific sectors eligible for 100% foreign ownership.
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Taxation
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Typically enjoys zero or very low taxes on corporate and personal income, with exemptions on import and export duties within the free zone.
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Subject to UAE federal laws and regulations, which may include corporate taxes and other levies as per federal and local municipality regulations.
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Regulations
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Operates under specific regulations of the respective free zone authority, offering streamlined processes tailored to various industries.
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Operates under UAE commercial laws and regulations, providing broader market access across the UAE.
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Business Activities
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Often designed for specific industries or sectors, offering industry-specific infrastructure, facilities, and support services.
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Can conduct business across the UAE market without restriction on geographical areas or sectors.
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Capital and Profit Repatriation
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Allows full repatriation of capital and profits without restrictions.
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Subject to UAE central bank regulations regarding repatriation of capital and profits, which can be more stringent compared to free zones.
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Setup Time
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Generally quicker setup process compared to mainland companies, usually within a few days to a few weeks.
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May have a slightly longer setup process due to additional regulatory requirements and approvals.
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Choosing Between Freezone & Mainland
Freezone
Ideal for businesses requiring 100% foreign ownership, tax efficiency, and specific industry-focused infrastructure and support. It’s suitable for companies focused on import/export, logistics, manufacturing, media, tech, and more.
Mainland
Suitable for businesses looking to tap into the broader UAE market, especially if dealing with local customers, government entities, or operating in sectors not fully supported by specific free zones.