If you are planning to start a business and want to learn the main benefits of starting a business in the free zone of the United Arab Emirates, you have come to the right place. However, before you understand the benefits of starting a business in the UAE, there are some important facts that you should pay attention to about starting a business in the UAE. Over the past few decades, the UAE government has played an active role in attracting foreign investment to Emirates from all over the world. The visionary government, pro-business policies and entrepreneurial spirit of the UAE people are the main reasons for the UAE’s economic progress.
The taxes and other financial benefits that the government offers to foreign investors are numerous. . When starting a business in the UAE, investors must choose one of 3 jurisdictions based on their business, clients and goals. Starting a business in this jurisdiction has its advantages and disadvantages. In this blog, we will briefly understand free zone jurisdiction and the benefits that come with it.
What are the Free Zones in the UAE?
Free zones are areas or special economic jurisdictions that issue permits to run companies and provide financial and tax exemptions. In total there are more than 40 free zones in 7 emirates. The Free Zone Authority or FZA is the administrative authority responsible for the main activities related to the operation and licensing of free zones. Investors can set up 3 types of business entities in the UAE Free Zone which 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’s get to the heart of the matter. The benefits of starting a business in the UAE free zone are listed below.
100% Foreign Ownership
One of the most obvious advantages of setting up a free zone business in the UAE is that it allows full foreign ownership. This means that foreign investors do not need to look for a UAE national sponsor to start a business. Foreign ownership is possible regardless of the nationality of the investor.
None Currency Regulations
Currency regulation refers to currency restrictions imposed by the government on foreign exchange transactions. There are no currency regulations in the UAE Free Zone. This makes financial transactions easier.
Duty Exemption on Import and Export
Import and export duties do not apply to UAE Free Zone jurisdictions. It helps promote international trade.
Tax Benefits
For companies in the free zone, a 100% tax exemption applies. This includes income tax and corporate tax.
Repatriation Benefits
The company is entitled to full repatriation service. And that includes profits and financial assets.
Smooth Labour Recruitment
Companies in the free zone can complete the formalities for hiring workers easily and cheaply. The company has the right to employ foreigners.
Availability of Workspaces
Warehouses and serviced offices in Dubai are easily accessible in the free zone area. UAE Free Zone ideal for SMEs and start-ups
Ease of Company Incorporation
The procedure for setting up a business in a free zone is simple and clear. because You can complete the licensing process in a few days compared to other jurisdictions.
Hassle-Free Immigration Procedures
Immigration facilities connected to the UAE Free Zone are efficient and hence save time.
Extraordinary Communication and Modern Infrastructure
The UAE free zone has the most modern communication system with perfect infrastructure. The free zone enjoys cheap and abundant energy.
Drawbacks Connected with UAE Free Zone Jurisdictions
Not all of them support the formation of free zone companies in the UAE. Because Investors should also be aware of these restrictions. These restrictions are listed below.
Restrictions Connected With UAE Mainland Trade
Direct trading in the local UAE market is strictly prohibited for companies based in the UAE Free Zone jurisdictions. If a UAE Free Zone company wants to trade on the UAE market, trading is only possible through local traders. Because, For the sale of goods or goods in the UAE local market, the company has to pay 5% duty in the free zone.
Business Activity Related Restriction
There are also certain restrictions on the type of business. Moreover, The UAE Free Zone is defined by a specific business activity or group of business activities. Therefore, companies established in certain free zones must carry out the assigned economic activities. It’s the best time to start a business in Dubai Free zone.
Work Location Related Restriction
If an employee has a company visa for a free zone, then the employee concerned must continue to work in the free zone.
Expensive Formalities
Certification and translation fees associated with free zones are expensive compared to mainland
Major Free Zones in Dubai
Dubai is currently home to more than 30 free zones. Lastly New free zone jurisdictions are under construction.
- Dubai Airport Free zone
- Dubai Gold and Diamond Park