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11 June, 2020

Five Benefits of a Freezone Business Setup

Business people and entrepreneurs always think of what would be the right jurisdiction for their company formation in Dubai. While some businesses get established in the Dubai mainland, some others get their business setup in free zones. In some cases, multiple entities get formed across mainland and free zone jurisdictions.

Businesses look for the right kind of benefit that they derive from their company formation in Dubai. The right and optimal business setup in Dubai could work as a strategic advantage in the long run.

What is a Freezone Business Setup?

In the UAE, and more in Dubai, free zones have been established by the Government authorities as a way to increase business and trade. To put it simply, a free zone is like a small business ecosystem within Dubai, whereby the Government regulations and rules are relaxed.

This would mean that once a free zone business setup is complete, the company would be able to trade with a little more freedom, as compared to mainland counterparts. This is the main reason to setup a business in Dubai within a Freezone jurisdiction.

If the core business involves dealing in products or services, a free zone business setup will surely prove to be advantageous.

What is the Free Zones available for Company Formation in Dubai?

To execute your business setup in Dubai, there are over 40 free zones. Some of the zones that have a strong reputation for Freezone business setup are

  • Dubai Silicon Oasis (DSO)
  • Dubai Airport Free Zone (DAFZA)
  • Dubai Design District
  • Dubai Healthcare City
  • Dubai International Academic City
  • Dubai Internet City
  • Dubai International Financial Centre (DIFC)
  • Dubai Knowledge Village
  • Dubai Media City
  • Dubai Gold and Diamond Park
  • Dubai Multi Commodities Centre (DMCC)
  • International Media Production Zone
  • Jebel Ali Free Zone (JAFZA)
  • Dubai Production City
  • Dubai World Central (Dubai South)
  • Dubai Studio City

What is the Reason to Setup a Business in Dubai Free zone?

  • Free zones act as business hubs and as valuable contact points for quickly entering your products into the market through legal entry points
  • Free zone business setup is relatively less expensive
  • Some of the laws in mainland Dubai are not applicable inside a free zone. For instance, employees of free zone companies have visa validity for three years
  • There is no requirement to involve a local sponsor for your Freezone business setup
  • You will get full 100% ownership of your company without the need for a local partner
  • All your profits and capital may be repatriated
  • All personal and capital gain taxes are fully exempted
  • The export/import duty is very minimal, making it a lucrative market entry structure
  • Corporate taxes are zero
  • All administrative services for the free zone are typically offered by a single-window portal access provided by the license issuing authority
  • Business trade license and employee visa validity, in some cases, maybe longer than mainland UAE norms
  • Typically the process of freezone business setup is quicker than mainland Dubai
  • Laws and regulations governing business and trade are typically easy to understand and meant to be more relaxed

What are the negative points associated with Company Formation in Dubai free zone?

The main negative reason to set up a business in Dubai freezone is that you are limited in your business geographical scope. For instance, you cannot freely trade your products in mainland Dubai unless you employ a distributor to do that for you.

Other reasons are:-

  • Inability to bid for strategic or large tenders;
  • Not possible to gain advantages of mainland Dubai benefits and grants;
  • Works better for visa purposes and less for proper business functionality;
  • Networking is somewhat limited to a few business sectors since each free zone typically has limited business sectors that it caters to;
  • Some experts have openly expressed the need for some stricter regulations and oversight on the financial and compliance aspects

For any business setup in Dubai, it is critical first to analyze the main reason for setting up a business, whether in a free zone or mainland Dubai. Once the goals and the long term vision is established, then it becomes easy to execute your company formation in Dubai. For any queries on mainland or freezone business setup, do reach out to our company formation experts.

FAQ

  • Is there only one free zone in Dubai?

No, there are over 30 free zones in Dubai alone, that offer business setup and trade facility for either specific sectors (such as DIFC) or diversified areas (such as JAFZA)

  • Can I run my business in a Free zone and trade with mainland companies?

Usually, this is not possible. The only case where you can execute your company formation in a free zone and freely trade with mainland Dubai is when your business operates in services and not in products. For instance, a free zone trader cannot sell his soaps directly to mainland companies. Still, a free zone training consultancy firm can deliver training courses (as a service) directly to mainland Dubai companies.

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