Foreign investors have mainly two options for setting up business in Dubai: the mainland and the free zones. Expatriate entrepreneurs and company formation consultants in UAE prefer to set up a business in Dubai's free zones rather than on the mainland for the ease of business formation procedure, comparatively lower costs, and, most importantly, ownership. Of 100% of the company without the requirement of a local sponsor.
Free zones play an important role in boosting and diversifying Dubai's economy and creating more job opportunities. With a highly efficient and independent regulatory structure, free zones are the most attractive option for business creation in Dubai for foreign investors.
What is a free zone, and what is it for?
Dubai was the first emirate in the UAE to develop the country-wide free zone model when it founded the Jebel Ali Free Zone (JAFZA) as early as 1985. Free zones are specially fenced geographical areas where goods can land, be handled, produced, or modified. Free zones are designated areas where tax, employment, and trade restrictions differ from the way it applies to jurisdiction on the mainland.
Most free zones are located near seaports or airports to facilitate imports and re-exports, which are the most common business activities in Dubai-free zones. For example, JAFZA is located in the port of Jebel Ali, while DAFZA is close to Dubai International Airport. Furthermore, free zones cannot trade directly in the UAE market unless they appoint a local distributor.
Characteristics that attract investors to start-ups in Dubai Free Zones
Dubai business formation consultants recommend Dubai Free Zone business formation for foreign investors due to its many advantages over business formation on the mainland. The following are the main features of setting up a free zone company in Dubai,
- 100% owned, no local sponsorship
Incorporating a company in Dubai is an attractive option for business start-ups, but requiring a local (UAE national) sponsor to own at least 51% of the company's shares has been a major hurdle for investors. Foreign investors. Expatriate entrepreneurs whose client base is outside the UAE prefer Dubai free zone company formation due to the highly attractive feature of 100% ownership.
- Most Dubai Free Zones are Industry Specific
Business registration in Dubai Free Zones is preferred by expatriate entrepreneurs, mainly because they have the option of launching their business in a Free Zone dedicated to their industries. An investor in the media business can set up a company in Dubai Media City, or if his goal is to set up an IT company, there is Dubai Silicon Oasis (DSO) and Dubai Internet City. The Dubai Financial Center (DIFC) specializes in the financial sector and fintech companies. Dubai Health City, Dubai Outsourcing City, Dubai Design District, and Dubai Textile City are well-known free zones dedicated to specific sectors.
- Repatriation of 100% of profits and important tax exemptions
Being a company that operates in a free zone of Dubai, the entrepreneur can take the profits obtained to his country. Companies can also enjoy significant tax breaks, as there is no income or corporate tax in the UAE. However, the oil and banking industries fall within the scope of corporate tax. In addition, companies whose taxable supplies exceed the threshold of AED 35,000 must register for the VAT consumption tax. The best company formation consultants in Dubai help companies register for VAT and guide them through the company registration process.
- Independent regulatory bodies
Free zones are designated commercial geographic areas governed by the respective regulatory authorities. The rules and regulations that govern the incorporation of companies in each free zone are determined according to the policies of the respective authorities of the free zone. For example, the regulatory authority for the Dubai Raw Materials Center (DMCC) is the DMCC Authority. The DIFC-free zone is regulated by the DIFC Authority, the DFSA, and the DIFC courts. Separate rules and regulations give investors more flexibility when setting up a company in Dubai Free Zones.