Dubai Free Zone Companies
How to choose the right free zone for your Dubai-based business?
Setting up your Business in Dubai - Benefitting from our expertise.
Dubai Free Zone Companies –
How to Choose the Best Option for You?
The United Arab Emirates offers a choice of more than 40 free zones. Around 30 of them are free zones located in the Emirate of Dubai.
Choosing the right one for your business might look a bit confusing. However, if you clearly define your goals and expectations, picking the right Dubai free zone for you is not difficult at all.
Despite many free zone companies being on the expensive side, we will often be able to advise you on Dubai free zone company solutions that cost you less than USD 10.000 setup and first year’s fixed costs, and less than USD 7.000 annual fixed costs after the first year, both amounts include one visa, but exclude any additional office space that you may wish to maintain.
Your Main Decision Criteria
Finding the answers to only five questions will help you picking your ideal solution for your Dubai free zone company.
We are committed to provide you with two best solutions:
- The best solution for a Dubai free zone company with commercial infrastructure (warehousing etc.); and
- The best solution for a Dubai free zone company with office infrastructure, from a small shared workstation to offices that can provide space for hundreds of employees.
Toward the end of this article, you will find interesting general information about UAE free zones that you should know about (see “General Information About Free Zones in the United Arab Emirates”).
What will be the business line of my Dubai Free Zone Company?
All businesses in the UAE need to be licenced. Mandatory licensing applies to all businesses in the UAE, regardless their size, and no matter whether they are free zone companies or mainland companies (= companies outside of the free zones).
Each free zone maintains its own list of business licences, generally in the range of several hundreds.
Business licences are available against an annual fee, which ranges from AED 10,000 to 35,000 (USD 2,725 to 9,538).
Free zones arrange their licensable business activities in groups of sub-categories and allow two to four sub-categories to be chosen under one business licence. Should your free zone company’s planned business line span over different groups of business licenses or comprise more than two to four sub-categories, depending on each specific free zone, you would need to pay for an additional business licence or additional business licences.
While some free zone companies group their licensable business activities in a way that they can easily make more money, some free zones are more customer-friendly and list more related sub-categories in one group or keep the covered scope of business activities broader than other free zones.
The definition of each licensable business category is a quite technical matter.
Do I need industrial premises?
If you are planning to establish a business that requires a warehouse for temporary storage, or that requires facilities to repack goods or to assemble components, you will definitely have to choose a free zone that provides either ready-to-use buildings for warehousing or other physical activities that you plan to carry out in Dubai, or you may choose a free zone that provides ready plots to build your own facilities. While some other Emirates do provide industrial or logistic parks, or freeports (free zones with port facilities), Dubai does not only have the longest experience but provides the most professional solutions as well.
There are differences between Dubai’s free zones that provide facilities as described above.
Do I need to be embedded in a specific business eco-system?
Some industries benefit from mutual stimulation and inspiration of an eco-system, of which they prefer to be a part of. Mainly creative industries such as the film or fashion industry do often benefit from being a part of a respective eco-system, but this may go for the IT and software industry as well.
Dubai has some free zones that are dedicated to specific industries, such as the industries mentioned above. If this is what you are looking for and if you will have creative staff working in your Dubai free zone office, a dedicated free zone in Dubai might be a good option for your company.
On the other hand, many other free zones that are not dedicated to provide the right business licences, often come with additional benefits that might reduce your ongoing costs.
What size of office do I need, how important is the location of my office in Dubai?
It is mandatory for all free zone companies in Dubai as well as in the entire UAE to maintain a minimum of office infrastructure, at least. All Dubai free zones offer a minimum solution, typically called “flexi-desk”, or shared office. This option provides for a small number of hours per month (typically 5 hours) that a free zone company will be allowed to use a shared office. In other words, this is a low-cost solution for those who do not need an office but have to comply with the regulation to maintain some kind of office infrastructure. Depending on the free zone, annual rents for flexi-desks are in the range of approximately AED 10,000 to 20,000 (USD 2,725 to 5,450).
But there is a down-turn to this low-cost solution. Banks in the UAE are generally hesitating to open bank accounts for companies that do not have an adequate business infrastructure.
There are also economic substance requirements for some industries in the UAE, which are also applicable to free zone companies. Beneficial owners of UAE free zone companies that are not complying with the economic substance requirements (if applicable) and that are not resident of Dubai (= holder of an Emirati ID), are reported to the finance authorities of their country of residence. As this is a sensitive topic, we recommend that you benefit from our complementary consulting.
Other than the low-cost flexi-desk solution, free zones in Dubai are also offering more sophisticated office space, which may be a shared separate office or an office exclusively rented by one company.
Renting out office space to companies registered in a free zone is a part of the free zones’ business model. Consequently, office space, from flexi-desk to exclusive-use offices, needs to be rented within the free zones.
Very few Dubai free zones offer the option to rent office space outside of their own premises, mainly (quite expensive) business centres or business districts. There is one exception though, providing you with more freedom of office renting, outside of their premises.
How many residence and working permits (visas) do I need?
Shareholders of UAE free zone companies are entitled to receive visas, if they wish to do so. ‘Visa’ in this context refers to a residence and working permit, not to be confused with touristic visas, that nationals of many countries need to enter the UAE. The visas entitling for residence and working in the UAE are so-called ‘investor visas’ and ’employment visas’. Investor visas are provided to shareholders and/or beneficial owners, while employment visas are provided to any non-resident who will work in a free zone company. Investors may apply for an employment visa as well, if they wish to do so, instead of an investor visa.
Visa holders will be issued an Emirati ID, mentioning their status.
Visas are generally issued for a period of three years and must be renewed in due time.
It is a requirement for all visa holders to visit the UAE at least every 180 days. Should visa holders fail to do so, their visa will expire automatically.
UAE free zones charge a so-called ‘visa allocation fee’ per each visa required. The visa allocation fee per visa required is generally in the range of AED 2,000 to 4,500 (USD 545 to 1,226) and to be paid annually.
The visa allocation by a free zone is also linked to the number of flexi-desks rented. If an applicant requires three visas, for example, the free zone company would have to rent three flexi-desks. If a company rents an office for exclusive use, the number of visa allocations is depending on the size of the office. Depending on the free zone, the minimum square meter size per visa to be acquired usually is between 7 and 9 sqm. A few free zones provide a minimum office size requirement of 5 sqm per visa. If a company needs a rather large office for their employees, typically for at least 10 or 15 employees, some Dubai free zones are willing to agree on a discounted sqm size of the office.
Please note that we will be able to offer a more favourable solution than described above.
In addition to the visa allocation fee, there are costs of the visa itself. Those costs include a mandatory medical test, a basic annual health insurance from a local provider, the Emirates ID, VIP services if required (highly advisable; include pick up by car, appointment with medical test provider without long waiting, appointment with the Immigration Department without long waiting, assistance with the health insurance and its annual fee, return by car), and include the services of the service provider, who handles the quite complex procedures.
The aforementioned visa costs typically range from AED 8,000 to 13,000 (USD 2,180 to 3,542) every three years (except the basic health insurance of about AED 1,000 to 1,500 (USD 272 to 409), which is charged annually).
We will be happy to further elaborate and to provide you with outstanding solutions for you and your company. Contact us now through our form below.
Note on how we proceed:
Once you have contacted us, we will send you a basic form asking for your requirements as explained in this article. We will schedule a Zoom video meeting with you as soon as we have received the completed form, enabling us to advise you as per your specific needs.
General Information about Free Zones in the United Arab Emirates
What is a free zone?
A free zone is a designated area of a country where any goods introduced, insofar a country’s customs and tax authority are concerned, are regarded as outside of the country. Free zones were established many hundred years ago in order to support export and import, as well as industrial activities. The first free zones were established where goods arrived from overseas, ports. Therefore, those free zones were called free ports.
Free ports have existed in some form around the Mediterranean Sea since Antiquity. The first formally established free port, the free port of Livorno, has been founded by the Medici in the late 16th century; it constitutes the earliest and most successful example of a free port in the early modern era.
Depending on the country and its legislation, free zones are sometimes also referred to as special economic area.
When goods arriving on vessels, and nowadays on planes, are dispatched to a free zone or free port, they are not immediately subject to custom duties and taxes, as long as they remain in the free zone. Instead, the trading company is obliged to pay custom duties and taxes as soon as they sell any quantity of their goods to customers outside the free zone. Those customers are located in the domestic market, being under the customs and tax authority of the country. This enabled traders to bring goods from overseas in large quantities, but to pay custom duties and taxes only on the smaller quantities they are actually selling to their customers in the country. This decreased the need for operation capital and thus supported trade.
Some free zone include industrial areas, where industrial production takes place outside of a country’s customs and tax authority, thus furthering the development of industrial production.
Free zones in the United Arab Emirates
Jebel Ali Free Zone (JAFZA), the oldest free zone in the United Arab Emirates, has been established in 1985. It is home to over 8,000 companies, including almost 100 ‘Fortune 500’ companies. The Jebel Ali Free Zone contributes around 23% to the Gross Domestic Product (GDP) of the UAE. It is located close to the world’s largest cargo airport, the Al Maktoum airport, which is located in Dubai South, a large industrial area of which the Dubai World Free Zone (DWT) is a part.
The other free zone with a port is Hamriyah Free Zone in the Emirate of Sharjah. Spread over 26 million square meters, it is home to a number of steel manufacturers and the primary hub for oil and gas.
When the first free zones were established in the UAE, the country had no taxes at all, other than a levy on oil and gas excavation and a custom duty on alcoholic and tobacco products. The idea of UAE’s government was to grant peace of mind to businesses by allowing tax-free operations even in case of any future taxes that might be levied. Today, the UAE implemented VAT at a rate of 5% and corporate tax at a rate of 9%. Both VAT and corporate tax are not applicable to free zone companies, except any business that free zone companies might conduct with mainland companies of the UAE.
UAE free zones without a port
Years after Jebel Ali Free zone has been established, the UAE extended the free zone idea to services as well. This was the birth of all the free zones in the UAE today, which do not have a port or airport, and which are located in large office buildings.
Free zones became a business model of its own, attracting companies from all over the world to move to the UAE or to set up subsidiaries and branches in the UAE, all located in free zones.
As free zones without a port became a distinct business model, new rules aiming to increase their profit base, were formulated; examples are the licence fees for business activities, the obligation to rent office space within the territory or building of the free zones, visa allocation fees, etc.
In return, companies set up in the free zones of the UAE enjoy tax-free business, except for businesses with mainland companies.
Together with the development of the free zone sector, the UAE, and in particular Dubai, developed its business and logistical infrastructure tremendously.
The UAE did also ease the rules for foreigners to become residents of the country, thus attracting manpower and brainpower alike.
As an Emirate with relatively little income from oil and gas, Dubai always played the leader role on non-oil and -gas business. Therefore, Dubai is still the most advanced and best organised Emirate to do business in the UAE.
While Dubai had a total population of 370,800 in 1985, the population in 1995 was 674,000. 15 years later, in 2010, Dubai’s population had increased to 1,905,476. According to the Dubai Statistics Centre, the population of Dubai is 3,515,810, as per 10 July, 2022.