Setting up a company can seem like a minefield. With regulations, essential paperwork and various overheads, it can be rather daunting. However, setting up in a free zone in the UAE is much easier than you might think and, if your company fits the criteria, you can reap a barrage of benefits.
“Establishing a company in UAE free zones is quite easy for various reasons,” says Svetlana Kursheva, Corporate Services Manager at My Business Consulting DMCC.
“Above all else, the free zone companies can be owned 100 per cent by non-UAE nationals. In some free zones, the licence can be obtained within one or two working days, while in others it can take between two to four weeks.”
Being able to set up a company in a short time frame would certainly appeal to eager entrepreneurs, but not everyone will be eligible to set up in a free zone.
Business activities
“All companies cannot be established in a free zone, as certain business activities are allowed only for mainland operations,” says Kursheva. “For instance, construction, maintenance, fit-out companies, or retail shops need to be set up on the mainland. However, the list of business activities allowed in free zones is huge and differs from one free zone to another. This includes any wholesale trading businesses and all types of service providers, such as management, marketing, IT consultancies, software solutions, logistics-related services and industrial licences.”
All companies cannot be established in a free zone, as certain business activities are allowed only for mainland operations.
For those who are eligible, the next question will undoubtedly be how much this will set them back and the good news is that it needn’t break the bank.
“The cost of setting up a business in the UAE varies immensely from one free zone to another, depending on the free zone location, cost of facilities, and the number of UAE residence visas required,” explains Kursheva, adding, “While choosing a free zone, it is important to pay attention not just to licensing fees, but also to the package which will allow you to open a corporate bank account successfully.”
Indeed, there are many different free zones to choose from and so too are there various types of licences. Syam Panayickal Prabhu, Managing Director and Senior Consultant, Aurion Business Consultants, says, “The current licences available in free zones are for service, commercial trading, industrial and manufacturing businesses.”
You need to think about the budget you are ready to spend, whether you require office or warehouse facilities or a virtual office, the visa quota required and whether a particular free zone suits the modus operandi of your business.
Prabhu has some advice though. Before applying to any free zone, you need to consider the things that you will require to successfully run your business.
He says, “You need to think about the budget you are ready to spend, whether you require office or warehouse facilities or a virtual office, the visa quota required and whether a particular free zone suits the modus operandi of your business.”
Some of the benefits of free zone companies are that you have 100 per cent responsibility for your organisation, there is no necessity to impart 51 per cent of your organisation to a nearby support.
With everything in place, the benefits can pay dividends and Hatem El Safty, Managing Director, Business Link UAE, says, “Some of the benefits of free zone companies are that you have 100 per cent responsibility for your organisation, there is no necessity to impart 51 per cent of your organisation to a nearby support. There is no customs obligation for import/export and shareholders and workers are qualified to get UAE residency visas.”
One of the most recent changes that has applied to businesses in the UAE was the advent of VAT. Some might still be confused whether VAT is applicable for free zone companies. El Safty clarifies this point, “For setting up a business in a UAE free zone, the most appealing parameter for an entrepreneur was that they are free from paying taxes. This has changed and it is now subject to the UAE VAT law and free zone organisations need to register for VAT.”
However, while there is a small amount of VAT to consider, other costs have gone down, so now could be just the right time to set up that business.
Setting up on the mainland
There are two main types of licenses available on the mainland. For a commercial business licence, expatriates need to have a local partner who will own 51 per cent of the business. Alternatively, a professional business licence enables the company to be owned 100 per cent solely, although a local service agent is required.
Mainland companies in Dubai are registered with the Dubai Economic Department. These companies can do most activities in the UAE with their offices, shops and showrooms in the city. A mainland company has a fast-track option and some mainland licences can be issued within three working hours.
Farina Ahmad, CEO, Make My Firm, says, “Mainland companies in Dubai are registered with the Dubai Economic Department. These companies can do most activities in the UAE with their offices, shops and showrooms in the city. A mainland company has a fast-track option and some mainland licences can be issued within three working hours.”
To set up a mainland company, you need to contact the Department of Economic Development (DED) of the emirate, who can issue a hassle-free licence. Alternatively, business consultancies can assist in providing advice and obtaining the appropriate licence.
— H.J.F
