Company Formation in Dubai Free Zones

Updated on October 23,2020
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Why-should-you-open-a-company-in-a-Dubai-free-zoneDubai is currently one of the easiest places to register a company in the world. Apart from that, Dubai offers other advantages which is why the number of foreign investors interested in business setup in Dubai free zones is constantly growing. Enterprisers have two options for starting a business in Dubai and various types of legal entities to choose from. They can open a company within the Emirate or in one of its free zones. Dubai has more than 30 fully operational free zones and few others in the development phase, satisfying the needs of those intersted in company formation in a Dubai free zone.

Types of companies for business setup in Dubai free zones

Foreign enterprisers can choose to register free-zone limited liability companies or work as sole traders, while foreign companies can establish free zone companies with a corporate shareholder or branch offices. Investors can also operate as sole proprietors, provided that they apply for one of the professional licenses issued by the free zone authorities.

No matter the type of company one decides to set up in one of Dubai’s free zones, the following licenses are available:

  • general trading licenses;
  • trading licenses;
  • industrial licenses;
  • national industrial licenses,
  • service licenses.

For certain types of activities, minimum share capital requirements apply depending on the free zone where the company will be registered. Here is a video presentation for you: 

Advantages of company formation in a Dubai free zone

The first and most important benefit of starting a business in a Dubai free zone is the great number of free zones surrounding the emirate. Dubai is now home to more than 30 free zones, however a few others under construction. It is also worth mentioning the fact the conditions for setting up companies in any of them are pretty much the same.

Companies operating in Dubai mainland have multiple tax advantages, however, these advantages are also present in its free zones. Among these, we mention:

  • the lack of any taxes imposed on the corporate income of locally registered companies;
  • one of the lowest value added taxes in the world at a rate of 5%;
  • the free repatriation of profits is available in all of Dubai’s free zones;
  • access to a wide network of double taxation agreements concluded by the UAE.

Dubai free zone companies also benefit from exemptions on imports and exports. We can assist with VAT registration services in Dubai.

It is easier and quicker to register a company in a Dubai free zone than to set up a business on the mainland. This is because the company incorporation procedure of a business in a Dubai free zone is completed in one step.

Among the facilities offered by Dubai’s free zones are the office spaces, warehouses and the factories which operate within the same areas where the companies are.  This way, the time and money spent on such facilities are reduced to a minimum.

One of the greatest advantage of business setup in Dubai free zones is the fact full foreign ownership is permitted. Compared to any free zone, incorporating a company in Dubai implies having a national partner who will own 51% of the shares in the company. The other reasons what make Dubai free zones so attractive are:

  • investors can benefit from a 3-year visa and can sponsor their families;
  • hire employees without the appliance of the UAE labor legislation;
  • quick and easy company incorporation procedures;
  • excellent infrastructure for any type of business;
  • no taxes.

Depending on the free zone where the company will be located, tax exemption can be granted for a 50-year period of time.

Most foreign investors decide to open free zone companies in Dubai because of the following benefits:

  •           full foreign ownership;
  •           quick and simple business registration procedure;
  •           free repatriation of profits in most free zones;
  •           a larger variety of business licenses compared to onshore companies;
  •           each free zone is dedicated to specific industries;
  •        each free zone has office spaces, industrial parks, and warehouses to cater to the needs of every type of company.

How to Open Companies in UAE Free Zones

Foreign investors who want to operate in UAE free zones by establishing companies here must respect the following steps:

  • select the type of structure of the company;
  • apply for the residence permit (if applicable)
  • reserve the company name;
  • apply for the business license;
  • obtain the legal address of the business;
  • obtain work permits for foreign employees (if required).

It is useful to know that the free zone authority in which the company will operate will handle all the visa applications and company registration procedures through a fast-track process.

Our advisors can handle the preparation of the documents required to open a free zone company in the UAE.

The following requirements must be respected for company formation in Dubai free zones:

  1.          most free zones allow for single or multiple shareholders – their number will also determine the business form of the free zone company;
  2.      .   the documents which need to be prepared for registering a free zone company are the Memorandum and Articles of Association;
  3.           the share capital requirements for opening a free zone company depend on the Dubai free zone authority (each free zone has its own regulations in this sense);
  4.          no matter the Dubai free zone, each company must apply for a license based on the activities it will undertake;
  5. in the case of foreigners, it is necessary to appoint a local agent to complete the company registration procedure of a Dubai free zone company.

What Dubai free zone to choose

When choosing a Dubai free zone for company incorporation, foreign investors must know that each free zone offers business licenses related to one or more related industries. Free zones in Dubai can be grouped as it follows:

  • Dubai Media City, Dubai Silicon Oasis and Dubai Internet City are dedicated to the new emerging industries like the software and media clusters;
  • Dubai International Academic City and Dubai Knowledge Village are dedicated to the education industry;
  • Dubai Studio City and the International Media Production Zone are related to the media sector;
  • Dubai Maritime City is dedicated to foreign investors seeking to open companies in the maritime sector.

Apart from these, Dubai Multi Commodities Centre which is currently the largest free zone in the Emirate, was opened for foreign investors who want to open companies in the import/export industry.

Taxation in Dubai free zones

One of the most important reasons foreign investors choose to set up companies in the UAE is the country’s taxation system which provides mainly for the taxation of companies operating in the oil and financial industries. It must also be noted that each Emirate has its own tax laws. Among them, Dubai has one of the most advantageous tax systems. Dubai also has an important number of free zones which govern themselves and have their own taxation systems.

Our company formation agents in Dubai can offer detailed information about the Emirate’s free zones.

Applying taxes in Dubai free zones

Each free zone in Dubai has its own authorities which issues and enforces the applicable legislation, including tax decrees. The most popular free zone in the Emirate is the Dubai International Financial Centre, however, there are also other free zones offering advantageous tax conditions. A company is considered tax resident in a Dubai free zone once it is incorporated with the relevant authority and if the management of the company is exercised in Dubai.

Considering free zone authorities in Dubai do not impose a corporate tax, companies are not required to pay this tax in the Emirate or to follow other procedures related to taxation; therefore, companies are not required to file annual tax returns. There are no taxable periods or tax assessments imposed to free zone companies in Dubai.

Types of taxes in Dubai free zones

Dubai free zone authorities do not impose any income tax on companies or individuals, which is why no dividend or corporate taxes are levied in any of them. However, the local authorities impose a municipal tax on properties held in this country. If the property is a rental, the tenant is usually required to pay this tax. 

Dubai free zone authorities usually offer tax exemptions for up to 50 years to foreign companies operating here. However, foreign shareholders of Dubai free zone companies must pay attention to the taxes they are subject to in their home country and if any double tax treaty applies in their case.

If you want to open a free zone company and need assistance, you can contact our company formation agents in Dubai who can handle the registration and licensing procedures.

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