Free zones or free trade zones in Dubai are business zones where companies operating in them are exempt from all types taxation such as Value Added Tax (VAT), Income Tax, Corporate Tax and Customs. Business owners in the free zone areas in Dubai have 100% ownership of the business.
The aim of these zones is to encourage foreign investment and promote economic activity in the city. Dubai was the first emirate to introduce the free zone model in the UAE.
Benefits of Free Zone
- 100% ownership of the business.
- Full tax exemption.
- Can be formed by only one individual
- You can open a bank account in Dubai
- 100% Secrecy maintained
- Less Renewal Charges
- You can do international business
- Can do multiple activities
- Can hold Properties
List of Dubai Free Zones
Currently, there are 24 free zones in Dubai, each catering to specific sectors and industries. They are divided into three major categories and are as follows:
- DUBAI CREATIVE CLUSTERS AUTHORITY (DCCA)
The DCCA, now known as the Dubai Development Authority mandates the development of creative and knowledge-based industries in the city.
- DUBAI MULTI COMMODITIES CENTRE AUTHORITY (DMCC)
The DMCC Authority is the hub for global commodities trade.
- OTHER DUBAI FREE ZONES
These Dubai free trade zones deal with a variety of industries that range from gold and jewellery to health care and manufacturing:
The pre-requisites of registering a company in a Dubai free zone –
- Determining the type of legal entity
- Choosing a trade name
- Applying for a business licence
- Renting or buying an office
- Obtaining other pre-approvals
Type of Legal Entity
Determine the type of legal entity your business would take up. In a free zone, you can set up one of the two types of companies:
- Free Zone Limited Liability Company (FZ LLC) or Free Zone Company (FZ Co.)
- Free Zone Establishment (FZE)
The differences lie in the number of shareholders and whether the shareholder is a natural person or a legal person. All free zones might not register both types of companies. You need to check with individual free zone authorities about the type of company they can register.
Existing local and foreign companies may set up a branch of their company in free zones.
There are different Capital Requirement as per different Free Zones and the kind of company one is willing to set up. This has to be checked as per the authority rules of the said Free zone.
Choose a Trade Name
For choosing the name of the Company one should check either with the respective free zone authority or the respective with the Department of Economic Development about the permitted trade names and whether the intended name has already been registered.
In general, for DED to approve the proposed trade name, the key requirements are that the trade name:
- must not violate the public morals or the public order of the country
- must be followed by the legal form of the company, for example (LLC, FZE, DMCC etc.)
- has not been previously registered
- is compatible with the required type of activity and legal status
- should not contain names of any religion, or governing authority, nor names or logos of any external bodies.
Get a Business Licence
The type of business licence you will apply for depends on the primary activity of your business. Every free zone authority provide with a list if lisences it provides as per the business activity of your company. For example –
In DMCC, one can choose from over 600 business activities ranging from over 20 sectors such as energy, commodities, gold and diamonds, technology, constructions, FMCG, healthcare, aviation, shipping, education, media, professional services, financial services and personal and community services.
In DIFC, you can conduct financial and non-financial businesses. Financial businesses include banks, insurance, wealth management and capital markets. Non-financial businesses include retail shops, restaurants, five-star hotels, art galleries and academic institutions.
Choose an Office Space
You can either buy or lease office spaces in free zones. Office requirements depend on the number of employees and type of business activity of your company. Different authorities of different free zones has laid down rules and options for election of offices. For example –
In Dubai Airport Free Zone, you can choose between ‘Office Packages’, ‘Smart Desk Office Packages’ and ‘Executive Office Packages’.
Hamriyah Free Zone Authority provides over 100 executive offices suits ranging in size from 15 m2 to 42 m2 with conferencing and internet facilities.
Get Pre-Approvals, Register Your Business And Get Your Licence
Companies established in free zones are governed by the rules of the respective free zones. To get the necessary approvals, you need to apply with the documents. The list of documents varies on the type of business activity, the type of company and the requirements of the free zone authority. Below is a general guideline of steps and documents needed for approvals.
A. Initial approval
First, you need the initial approval. You are required to provide:
- Completed application form
- Business plan
- Copy of existing trade licence/registration certificate (if you are an existing company, applicable for local company only)
- Coloured passport copies of the company’s shareholder/s and the appointed Manager/Director for the new company
- Specimen signature of the company’s shareholder/s and the appointed Manager/Director for the new company
- 2 years’ audited financial reports for corporate entity or certificate of reference from a personal bank of the individual shareholder
- NOC from current sponsor (for individuals)
- Unit title deed
- Letter of Intent
- Registry Identification Code Form (RIC) for Manager/Director (Original and otarized)
Freelancers need to submit fewer documents. In most cases, they need to submit:
- Application for registration
- Bank reference letter
- Registry Identification Code Form (RIC) (Original and otarized)
After getting initial approval, you need to pay registration fees and licence fees. The fees depend on the type of licence required. Then, you need to submit:
- Completed application for registration
- Board Resolution appointing Manager/Director (Notarised and attested)
- Power of Attorney given to Manager/Director (Notarised and attested)
- Memorandum and Articles of Association (Notarised and attested)
- Specimen signature of Manager/Director (Notarised and attested)
- Passport-size photo of Manager/Director against white background
- Share capital information
C. Licensing and Visa Process
- Lease agreements will be prepared by the authority
- Then trade licence will be issued
- Visa processing will start