Free Zone Company Formation in Dubai
Hi, Sunil here to talk business, specifically free zone company formation in Dubai, one of the most favorable places globally to set up and do business.
The Palm Jumeirah and the world's tallest building, The Burj Tower, The United Arab Emirates are still experiencing phenomenal growth in all major business areas including construction, real estate, financial & professional services, tourism and trading
What Free Zone Company Formation has to Offer?Dubai still provides a business enhancing environment - though not immune to the global crisis (like the one in 2008).
Dubai usually manages to overcome a crisis much faster than other places in the world.
The UAE offer a 0%-tax incentive (all Free Zones) for at least 15 years with the option to extend for another 15 years.
Government interference in business is minimal. Rents are trending downward from their all time highs for residential and commercial premises which make setting up a business in Dubai lot cheaper than when Dubai was at its bubble peak. As of 2009, the UAE offers about 35 free zones in various emirates, with the majority being in Dubai.
Cost effective option for small business owners - E-Office (Virtual Office)Small companies are usually not aware of the options available by registering a company in a smaller emirate like Ajman, Sharjah, Ras Al Khaimah or Fujeirah. One of the most cost effective solutions for small companies is the so called E-Office set up which gives the investor a business license (service and trading), a 3 year residence/employment visa and a corporate bank account.
This type of set up can be done with a relatively small budget starting from AED 25.000 - AED 35.000 plus proof of share capital ranging from AED 100,000 to 185,000. E-Office Set up has the advantage of not being forced to take expensive office space. The E-Office license comes with a hot-desk facility in the Free Zones business center. I definitely recommend this option if you are a small business. I am a big believed in this business model.
Which is the best set up for your business?A lot of business people dont know in the beginning which route to take, either setting up with a local sponsor or going to a free zone. Do you know where you stand? Also there is sometimes a lot of conflicting and confusion information in the market as to what type of business can actually register with a free zone and operate from there and what are the limitations. Do you know if your business qualifies? What about the restrictions you face?
Therefore information obtained from industry professionals who have been dealing with the UAE free zones on a daily basis can save you (the potential investor or future business owner) a lot of headache.
Common questions that need to be clarified before setting up:
What is a Free Zone?According to the World Federation of Free Zones (FEMOZA) a Free Zone is a portion of a clearly defined and isolated land or setting, with a special tax, customs and imports regime, usually involving a status of extra-territoriality.
Free Zones provide state of the art infrastructure and are designed as special investment models allowing total ownership of the business in the UAE. Therefore, to establish a business entity in one of the UAE's many Free Trade Zones (FTZs) can be an attractive option for foreign investors like you who wish to keep 100% ownership of your business.
An independent Free Zone Authority (FZA) governs each free zone, and is the agency responsible for issuing FTZ operating licenses (which can be service, trading or industrial/manufacturing). However, not all businesses will fit into a free zone. Purpose of the business has to be clearly defined and laid out in a detailed business plan.
You can either register a new company in the form of a Free Zone Establishment (FZE), which means the company has one shareholder (individual or corporate person), or a Free Zone Company (FZC, FZCO, FZ-LLC). In this case the company needs a minimum of two shareholders (maximum of 5 shareholders). Alternatively you can establish a branch office of your existing or parent company. Free Zone companies are in general limited liability companies (LLC).
What kind of licenses will be issued?If you chose to do business in Dubai and set up in any Dubai Free Zone, you will have to lease either office premises or land and acquire a business/trade license from the respective Free Zone Authority (regulated by law). Dubai Free Zones do not allow to rent office/warehouse space outside their boundaries (except: If no space is available at the time of registration some of the Free Zones issue a temporary license to rent space outside until space will be available inside the Free Zone).
Strictly speaking companies with trade and industrial licenses can only conduct business within the Free Zone or abroad. To sell their products in the UAE, a UAE official agent is required by law. For service based businesses no agent is required. All new entities such as FZE or FZC (also FZCO or FZ-LLC) have to show share capital upon registration ranging from AED 50,000 to AED 1,000.000 depending on the Free Zone requirements and the structure of the company. All licenses are valid for 1 year and need to be renewed prior to expiry.
Registration processThe actual application and registration process can be quite tedious. Depending on the structure of the company (individual owners or corporate) a number of documents need to be notarized and UAE Consulate attested in your (the applicants) home country. Also the reviewing process whether your company will be accepted can take anything from 2 weeks to 2 months.
Dubai Free Zones prefer established companies with a proven track record. Start-up companies sometimes find it difficult to set up in a Dubai free zone. Free Zones take the liberty to refuse giving licenses to companies that do not fit into their overall framework. However, there are also solutions for small and start up companies (e.g. E-Office is the cheapest solution that does not require to rent office space, however, licensed only through selected Northern Emirates Free Zones).
Individuals, small companies or labor intensive businesses are highly welcome to set up their business in any of the Northern Emirates Free Zones, which are improving / extending their infrastructure (same tax benefits). Where does your business fit?
What costs are involved setting up in a Dubai Free Zone?Dubai Free Zones are not exactly cheap since all costs have to be paid for a year in advance (this goes for all rents in Dubai), the biggest part of the costs effectively has to be attributed to rent. Setting up a business in a Dubai Free Zone can cost anything from AED 50.000 to AED 500.000 or more (depending on the space requirements).
Office space within the free zone boundaries currently starts at around AED 170 per sq.ft per year which is significantly lower than in 2008, however price increases can be dynamic. New office space is usually handed over as core & shell and you (the tenant) has to do the complete up-fitting work by hiring a fit-out company. In most cases fit-out companies as well as the drawings for the new office have to be approved by the free zone authority (Zoning Authority).
Can you buy your own office inside the Free Zone?The new trend is to offer freehold office space within Free Zone boundaries. Examples are Jumeirah Lake Towers - JLT (licensed through Dubai Multi Commodities Centre DMCC), International Media and Production Zone - IMPZ, Dubai Silicon Oasis - DSO and many more are planned for the future.
However, in order to operate from a freehold office you still must apply for a business/trade license to be issued by the respective Free Zone Authority. Prices for freehold offices are on average around AED 650 per sq.ft. and up depending on location and status of the construction. A trading license will only be given once the office is ready for handover. Buying off plan does not qualify to get a license immediately.
Which Free Zone Should You Choose?The selection of the right Free Zone depends on the type of activity your company wants to engage in (e.g. trading, e-commerce, internet and software development, automotive, heavy industry, broadcasting, publishing, healthcare, etc.) as well as the infrastructure required (e.g. warehousing facilities, airport or seaport access). Dubai has divided its Free Zones into various clusters healthcare/medical/spa = Healthcare City, IT, software, media = TECOM, trading = Jebel Ali ) offering state-of-the art infrastructure.
Types of Free Zone companies
Typical benefits of UAE Free Zones include (but are not limited to):
What are the factors that need to be considered when choosing a free zone:
List of Dubai Free Zones
Challenges in finding the right type of set upRead this very carefully. Setting up a new business in Dubais or Northern Emirates many free zones can be a daunting task. Although the Free Zones all seem to offer similar incentives it is not easy to figure out which type and structure of set up would be the best solution for you, the new business owner.
Free Zones in Dubai are mainly organised in clusters. If your proposed business does not fit the purpose of the free zone or if your operation may be considered too small, you could face being rejected. It is important to have the application documents that need to be reviewed by the respective free zone prepared in the proper way.
What does Global Office LLC have to Offer?Because we have received so many inquiries from website visitors on how to set up a free zone company in Dubai, I got in touch with one of Dubais more reputable and long standing client service firms who specializes in company formation and virtual offices. Global Office has been in business for a long time, and after having spoken to many that have used them, as well as getting to know Christine (she runs the place) over the years, I am glad to refer their services to our website visitors.
GO has the necessary expertise to be able to guide clients through the entire business start up process including advice on the correct commercial structure, type of trade license, assistance in finding suitable office space, processing residence visa applications and the opening of bank accounts.
Free Zones give guidelines but often you will finds yourself left alone with many questions that the free zone staff cannot answer. Also the choice of different free zone options can be overwhelming. The price range varies greatly and depending on the business model some free zones may be more suitable than others. It takes local expertise to know all the differences and to avoid choosing the wrong set up model.
So dont be the one to make that big mistake and get the right expertise by your side. Trust me, you dont want to get entangled in the legalities. You can contact Christine using the form below and run some of your ideas by her. She is a nice person who is very receptive of inquiries.
If you are interested in setting up a business in the Abu Dhabi area, I recommend you read our doing business in Abu Dhabi section.
2010 UPDATE New Virtual Office company set up with full business license and 3-year residence visa now available in Dubai. Costs start at AED 18,000 p.a. You as an Investor are entitled to get 5 visa for you and staff and can sponsor your family and a maid.
The set up is approved by Abu Dhabi High Court and is being licensed through a Northern Emirates Free Zone that is legally entitled to provide Free Zone business licenses in Dubai.
Their business center is conveniently located in Dubai Marina with loads of restaurants, hotels and ample free parking in walking distance . For more information, please contact our business partner Christine below.
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