If you are planning to start a business and want to know the top benefits of forming a free zone company in the UAE, then you are in the right place. Before understanding the advantages of free zone company formation in the UAE, just take a look at some important facts about having a business in the UAE.

For many decades, the UAE government has played a proactive role in bringing foreign investment to the Emirates from around the world. A visionary government, business-friendly policies, and the entrepreneurial zeal of the UAE residents are the major reasons behind the economic progress of the UAE. The tax-related and other financial benefits that the government provides to foreign investors are manifold. The UAE market is classified into 3 business jurisdictions: Mainland, Free Zone, and Offshore. When it comes to company formation in UAE, the investors should opt for any of the 3 jurisdictions based on their business activity, customers and goals. There are both benefits and drawbacks associated with forming a company in these jurisdictions. In this blog, we shall have a brief understanding of the Free zone jurisdiction and the benefits associated with the same.

What are the free zones in the UAE? 

Free zones are special economic regions or jurisdictions that issue operating licenses for business establishments and grant financial and tax exclusions.  Altogether, there are over 40 free zones in the United Arab Emirates. The government body in charge of a Free zone is called the Free Zone Authority. Free Zone Authority or FZA is the governing body in charge of the pivotal activities in connection with free zone operations and license issuance.  

An investor can form 3 types of business entities in a UAE free zone and they are listed below.

• Free zone company (FZC)
• Free zone establishment (FZE)
• Branch of a business concern

Benefits of Forming a Free Zone Company

Now let us come to the crux of the topic. The benefits associated with Free zone company formation are listed below.  

Complete foreign ownership - One of the most evident benefits of forming a free zone company in UAE is that complete foreign ownership is possible. This means that the foreign investor need not find a UAE national sponsor for company formation. Foreign ownership is possible irrespective of the nationality of the investor. 

Absence of currency regulations – Government-imposed restrictions on the exchange of foreign currencies are known as currency regulations. There are no currency regulations of any kind in UAE free zones. This makes financial transactions easier. 

Import and Export duty exemption – Import and export duties do not apply to the free zone jurisdictions in the UAE. This helps in promoting international trade.

Tax benefits – 100% tax exclusion is applicable for free zone companies. This includes income tax and corporate tax. 

Repatriation benefits – The companies are eligible for full repatriation benefits. And this includes profits and financial assets.

Smooth labour recruitment – Free Zone companies can conduct labor recruitment formalities easily and cost-effectively. The companies are allowed to recruit foreign nationals.

Readily available workspaces – Warehouses and office spaces are easily available in Free zone jurisdictions. UAE free zones are ideal for SMEs and start-ups 

Ease of company Incorporation – The free zone company incorporation procedures are simple and straight forward. You may accomplish the licensing procedures in less number of days compared to other jurisdictions. 

Trouble-free immigration procedures – Immigration facilities connected with UAE Free zones are efficient and therefore saves time. 

Excellent communication and infrastructure – UAE free zones have the most updated communication systems with impeccable infrastructure. Free zones enjoy cost-effective and plentiful energy. 

Drawbacks Associated with UAE Free Zone Jurisdictions

It’s not all about the benefits of forming a free zone company in UAE. An investor needs to be aware of the limitations too. Those limitations are listed below. 

Restrictions connected with UAE mainland trade - Direct trading with UAE local market is strictly prohibited for companies established in the UAE Free zone jurisdictions. If companies formed in the UAE free zone need to trade within the UAE market, the trading is possible only via a local distributor. For selling goods or commodities in the UAE local market, the free zone company needs to pay a 5% duty. 

Business activity related restriction - There are also certain restrictions connected with the type of business activity. UAE free zones are assigned with certain business activities or a group of business activities. Therefore the company formed in a particular free zone should perform the assigned business activity. This means that the freedom of business activity is limited. 

Work location related restriction - If an employee holds a Free zone company visa, the particular employee is required to pursue the work within the boundaries of the Free zone.  

Costly formalities – The notarisation and translation expenses associated with a Free zone is a costly affair compared to the Mainland. 

Major Free Zones in Dubai 

Currently, Dubai is home to more than 30 free zones. New free zone jurisdictions are under construction. 5 major Free zones in Dubai are listed below.

• Dubai Airport Free zone
• Dubai South Free zone
• Dubai Media City
• Jebel Ali Free zone is popularly known as JAFZA
• Dubai Gold and Diamond Park

I hope this helped you gain some clarity about the benefits of forming a free zone company in the UAE. Associating with a business setup consultant like Kiltons can help you get your business formation seamless and quick.  Kiltons can assist you with company formation in all major Free zones in Dubai and other Emirates. The legalities and documentation associated with company formation vary with free zone jurisdiction. If you need any assistance with company formation or associated services, get in touch with the Kiltons team as soon as possible.