Thinking of starting your business in a UAE free zone but not sure where to begin? You’re not alone. For aspiring founders and veteran entrepreneurs alike, business setup in a UAE free zone is a compelling option. However, with over 45 free zones, each with their own unique rules and ecosystems, how do you choose the right one?
In this blog, we walk you through the reasons why free zones are the top choice for entrepreneurs in the UAE, along with the rules and procedures that you’ll need to follow if you’re looking to complete your business setup in a UAE free zone.
What Is a Free Zone? How Are They Different?
A free zone is an exclusive economic area that’s designed to attract foreign investment to the UAE and diversify the country’s economy. Free zones in the UAE operate under their own authority and have specific regulations that do not apply to businesses outside the free zone.
Many of the UAE’s free zones are tailored to specific industries. For example, Sharjah’s SPC Free Zone offers attractive incentives to publishing companies, while Jebel Ali Free Zone (JAFZA) and Sharjah Airport International Free Zone (SAIF Zone) are targeted at logistics companies.
UAE free zone business setup offers attractive incentives, especially for foreign entrepreneurs. Understanding these benefits in comparison to mainland business setup can help you make an informed decision about the best location for your business.
Advantages of Business Setup in a UAE Free Zone
- 100% foreign ownership: Unlike companies in the mainland, you don’t need a local sponsor to start your business in a free zone. There’s no fine print: You’ll own 100% of your business.
- 100% profit repatriation: There are no restrictions in case your primary operations are based outside the UAE. You’re allowed to repatriate all your profits outside the UAE, giving you the freedom and flexibility to run your business the way you like.
- 0% income tax: Whether you’re an employee or an entrepreneur, you don’t need to pay any income tax in the UAE. While corporate taxes do apply, there are no taxes levied on companies that report a profit of below AED 375,000 per year.
- Faster and easier business setup process: The process of company registration in a UAE free zone is much easier and quicker than the mainland. For example, at SPC Free Zone, a free zone license in UAE can be issued instantly, and if all your documents are in order, you could receive your establishment card and residence visa within a week.
- More affordable costs: Setting up a business in the UAE mainland can be expensive. Free zones tend to be much more affordable, offering business licenses starting at just AED 5,750, helping even founders with limited budgets to start their business without shelling out too much.
That said, it’s essential to consider whether business setup in a UAE free zone is the right choice for you. For example, if your business activities involve trading across the UAE, such as retail or distribution, a mainland license might be more suitable. Keeping such caveats in mind, let’s take a look at some of the rules governing free zones in the UAE.
Free Zone Rules & Regulations
Foreign Trade
It’s important to note that if you proceed with business setup in a UAE free zone, you’ll face restrictions when trying to do business with the mainland. While you’re allowed to trade within the free zone and internationally, direct trade with the mainland often requires a local distributor.
Customs laws for free zone companies are also different from those on the mainland. Certain types of goods are prohibited within free zones and duty-free areas. Some of these goods include:
- Flammable merchandise, excluding specified fuels
- Radioactive materials
- Weapons, ammunitions, and explosives
- All types of narcotics and narcotic derivatives
Laws governing free zones
While mainland businesses are regulated by the Ministry of Human Resources and Emiratization (MOHRE), free zone businesses are subject to the laws of the free zone authority in which your business is set up. This means that for free zone companies, labor rights, employee disputes, and the regulatory frameworks are markedly different from the mainland.
How to Complete Business Setup in a UAE Free Zone?
The UAE Free Zone business setup procedure is very straightforward as long as you have your documents in order. Here’s a brief overview of the entire process from start to finish.
Selecting the right free zone
Your first decision is choosing which free zone you want to register your business under. This depends on your preferred business activities, the industry you want to be part of, and your budget. Once that’s done, the next step is to apply for a business license.
Choose your trade name and business activities
Your next move is to choose a unique trade name that accurately reflects the business activities you wish to conduct. It’s important to ensure your chosen trade name complies with the guidelines of the UAE government. Once that’s done, you’ll need to select your business activities.
Determine your legal structure
After your trade name and business activities are approved, you’ll need to choose your company structure. You can either choose an FZE (free zone establishment) with a single shareholder, an FZC (free zone company) with multiple shareholders, or a branch (opened by a parent company with 100% ownership).
Get your business license
The process of getting a business license is remarkably quick in free zones. For example, for certain business activities, SPC Free Zone offers an instant license provided that your documents are in order. However, do note that the timeline and costs for getting a license can vary, as certain activities may require additional approvals.
Secure an establishment card and register on E-Channel
Next, you’ll receive your establishment card with information regarding your company and visa quota. In case you’re looking to hire employees, you’ll also need to register on E-Channel, which is an online portal that streamlines services related to immigration, visas, and Emirates IDs.
Apply for your residence visa (Optional)
In case you need a visa for yourself, you’ll need to apply for one. If you’re outside the UAE, you’ll need to apply for an entry permit. If you’re inside the UAE, you can complete a “Change of Status” procedure that converts your current tourist or employment visa to your new one.
Apply for your corporate bank account
The final procedure for business setup in the UAE is to apply for a corporate bank account. Several free zones, such as SPC Free Zone have exclusive partnerships with leading banks to facilitate the process for you.
FAQs
If you wish to trade across the UAE without restrictions, getting a mainland or a dual license may be the better choice.
That depends on the free zone you choose and your chosen business activities. SPC Free Zone offers one of the most affordable packages, with licenses starting at AED 5,750.
There’s no limit to how many employees you can hire. However, if you require more than 25 employees, additional checks and verification may be required.
The process can vary, typically taking 5-10 working days. While free zone authorities have full control over the licensing process, they do not have any control over decisions made by UAE Immigration.
Yes! You’re allowed to sponsor your spouse and children for UAE residency. You’ll require a valid residency visa, meet the minimum salary threshold, and provide attested marriage and birth certificates to do so.
We hope this blog answers every question you may have had about business setup in UAE free zones. In case you’d like to learn more, contact us and we’d be glad to answer any questions you may have.
Enjoyed the read? Share it with your network!
