Free zones business set-up
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Launching a new business is an exciting time for any entrepreneur. However, before jumping head first into that business idea there are many things to take into consideration. From whether to set up on the mainland or in a free zone, to what visas are available, there are so many options. Therefore, it pays to heed some advice from an external business consultant who has all the information at their fingertips before making any final decisions.

“We understand the unique journey each start-up takes. From the initial spark of an idea to the execution, we help entrepreneurs with strategic planning using our AI-powered business plan builder. As they bring their vision to life, we provide essential services like company set-up and banking, backed by our strategic partners,” says Damian Brennan, Group Head of Marketing, Virtuzone.

Damian Brennan, Group Head of Marketing, Virtuzone

Choosing the right jurisdiction for your business

Business consultants can help guide start-ups on jurisdictions. With over 45 multidisciplinary free zones across Dubai, Abu Dhabi and the Northern Emirates, entrepreneurs are spoilt for choice, so it is wise to look at all the options.

“Choosing the right free zone to set up a business can be a critical decision for entrepreneurs,” says Malik Khattou, CEO, Always Improving.

Malik Khattou, CEO, Always Improving

“The first thing an entrepreneur should consider is the type of business they plan to start. Different free zones have different industry focuses, and some may be better suited for specific business activities than others. For example, some free zones specialise in technology or media, while others focus on manufacturing or logistics. The location of the free zone is another important factor to consider. Depending on the entrepreneur’s business needs, they may want to choose a free zone that is close to their target market, suppliers, or transportation hubs. Some free zones are located in very popular areas that are suitable for all kinds of shops,” Khattou explains.

The other consideration when choosing the free zone to set up in is the facilities and costs.

Khattou says, “Some free zones offer state-of-the-art office spaces, warehouses, and manufacturing facilities, while others may have more basic amenities. The cost of setting up a business in a free zone can also vary widely depending on the free zone and the type of business. Entrepreneurs should carefully review the costs associated with each free zone, including the commercial rent. By considering these key factors, entrepreneurs can make an informed decision about which free zone is the best fit for their business needs and goals.”

The good news is that setting up a business in the UAE has become more tangible than ever before, with new rules having made an impact on helping get businesses off the ground.

Stay informed about the changes in rules

“The recent changes in company formation have significantly helped UAE businesses get off the ground by simplifying the process and reducing the barriers to entry,” says Mohammed Firoz Khan, Director Business Development & Strategic Alliances, A & A Associate.

Mohammed Firoz Khan, Director Business Development & Strategic Alliances, A & A Associate

“Several changes have had the most impact, including the introduction of the virtual company licence. The virtual company licence allows entrepreneurs and freelancers to conduct business in Dubai without the need for a physical presence, significantly reducing the cost of setting up a business. There has also been the introduction of 100 per cent foreign ownership. The UAE government has allowed 100 per cent foreign ownership in several sectors, including manufacturing, agriculture, and renewable energy. This has opened up new opportunities for foreign investors and encouraged more foreign direct investment into the UAE.”

Khan says that long-term residency visas and the simplified processes to set up in the UAE, coupled with the support provided for small and medium-sized enterprises (SMEs) have also had a positive impact.

“The UAE government has simplified the business set-up procedures by reducing the number of documents required and introducing online services, making it easier and faster to set up a business. The UAE government has also introduced several initiatives to support SMEs, such as funding and mentoring programmes, which have helped to create a more conducive environment for entrepreneurs and start-ups,” says Khan.

“Overall, these changes have had a significant impact on UAE businesses by making it easier to set up and operate a business, attracting more foreign investment, and promoting entrepreneurship and innovation,” Khan adds.

New visas for investors

Certainly, entrepreneurship and innovation are something that is much encouraged in the UAE and today’s visa categories are a testament.

“The UAE aims to attract the best global talent and entrepreneurs to establish a business and settle in the UAE with their families,” says Syam P Prabhu, Founder and Managing Director of Aurion.

Syam P Prabhu, Founder and Managing Director of Aurion

“The government of the UAE has introduced numerous new visa categories to attract people from all countries. The Golden Visa is the most popular residence visa category in the UAE among foreign investors. It is a 10-year residence visa that is issued to foreign investors, skilled professionals, and outstanding students who will qualify for certain criteria. Alternatively, the Green visa is a 5-year visa issued for innovators, freelancers, and skilled employees who meet the criteria. This criterion includes a monthly income of Dh15,000 for skilled employees, and proof of funds/ evidence of annual income amounting to Dh360,000 yearly.

“In addition, there is also an Investor visa. Through this, entrepreneurs can start a business, sponsor themselves and their families. Investor visas have a validity of two years and are renewable.”

There are many visa options, with the Freelance visa being another opportunity for those wanting residency. However, whichever jurisdiction or visa an entrepreneur chooses, different regulations need to be followed.

Kallol Ghose, General Manager, SRTIP Accelerator

“Entrepreneurs planning to start a company in the UAE should be aware of the various laws and regulations that govern business activities in this country. This includes company formation regulations, commercial companies’ law, labour law, Intellectual Property laws, VAT and tax regulations,” says Kallol Ghose, General Manager, SRTIP Accelerator, adding, “Entrepreneurs should also be aware of other regulations related to their specific industries or business activities. By ensuring compliance with all laws and regulations, entrepreneurs can avoid legal issues and operate their business successfully in the UAE.”

When it comes to business regulations, it is important to remember that policies can change. The introduction of corporate tax on June 1 is a case in point and could affect companies in both free zones and the mainland.

Corporate tax for free zone companies

“The corporate tax regime, which applies to financial years beginning on or after June 1, 2023, has been set at a standard rate of 9 per cent and will be applied to taxable business profits exceeding Dh375,000. It applies to all businesses and commercial activities with a few exceptions. These include government entities, government-controlled entities, certain natural resources extraction businesses, certain non-extractive natural resource businesses, and non-residents who derive UAE-sourced income but do not have a permanent establishment in the UAE,” says Pratik Rawal, Head of Corporate Structuring, Creative Zone.

Pratik Rawal, Head of Corporate Structuring, Creative Zone

“All free zone companies fall within the scope of corporate tax and, as such, are required to register and file tax returns. However, the regime allows some benefits to honour the tax benefit agreements with the free zones, provided certain conditions are met. Our team of tax and accounting specialists would be better equipped to advise business owners on this matter,” Rawal adds.

Indeed, since tax and accounting can sometimes be difficult to follow, seeking the advice of a professional is highly recommended. Companies such as Trade License Zone (TLZ) Tax & Accounting can assist with everything from corporate tax preparation, registration, and VAT registration, to Economic Substance Regulations (ESR) consultations and filing and management.

“There is a host of standard business rules and regulations to abide by and specific rules and regulations may also apply alongside your chosen business activities. Our professionals are on standby to provide the necessary guidance at incorporation, and we update clients regularly and in real-time on significant changes and new implementations,” says Alexia Kobusch, General Manager of TLZ Tax & Accounting.

Alexia Kobusch, General Manager of TLZ Tax & Accounting

Although launching and running a business in the UAE is now easier than ever, to ensure your business doesn’t fall foul of any regulations, taking advice from professional sources will make all the difference.

“Acquiring appropriate guidance from a reliable source at the right time can expedite the seamless scaling-up process of start-ups. Non-compliance with new laws may lead to legal penalties, disputes, or litigation, causing business disruptions and delays,” says Steven Charles Wilson, Senior Business Consultant, Axiom Mark.

Steven Charles Wilson, Senior Business Consultant, Axiom Mark

“Since SMEs account for over 60 per cent of UAE’s GDP, strategic advice from a trusted business set-up consultant can aid start-ups towards economic, financial, and sustainable growth.”

Ensuring that the company is up-to-date with the changes in rules will help any business stay on the right path. Business consultants are aware of the fact that rules and regulations can change at any time and can therefore equip their clients accordingly.

“As the saying goes, change is the only constant in business. As such, it’s important for us to stay updated with industry trends, market developments, and regulatory changes that could affect our clients’ businesses,” says Rawal.

“We strive to embrace innovation by being open to new ideas, technologies, and practices that can help our clients stay competitive. We proactively support them through workshops and events to help them keep pace with ever-evolving business trends.” ■

Top reasons to hire a business set-up consultant

For a business to start on the right track, it is essential to take advice from the experts. From the applicability of corporate tax to updated rules in company formation, a business set-up consultant can provide the right up-to-the-minute advice.

Joshua Bettoney, Head of Operations Department, Business Incorporation Zone

“Consultants help start-ups avoid common mistakes like selecting the wrong business activity for registration, misunderstanding local regulations, and navigating legal formalities. They play a crucial role in ensuring a smooth and efficient business set-up process,” says Joshua Bettoney, Head of Operations Department, Business Incorporation Zone.

“Business owners may potentially face legal issues such as compliance with local regulations, completing the necessary paperwork, or obtaining the appropriate licences. We support start-ups by providing guidance on choosing the right business activity and managing legal requirements. We also offer services like tax consultation, accounting, bookkeeping, PRO services, and assistance with various types of visas, such as Golden Visas and dependent visas.”

Whilst it might look like it is easy to set up a business, particularly when there are often online portals available for free zones, a consultant can help save money and time in the long run.

“Entrepreneurs who are looking at getting a licence in the UAE can benefit from working with a business set-up consultant. Consultants have the knowledge of regulations. They can advise on licence structure and type, guide with legal and regulatory compliance, and offer insight into VAT implications,” says Kallol Ghose, General Manager, SRTIP Accelerator.

“Additionally, they can save entrepreneurs’ time and money, provide local expertise, and help select the right jurisdiction. Overall, a business set-up consultant can offer valuable support for entrepreneurs, allowing them to focus on building their business while the consultant handles the licensing process efficiently and effectively.”

Unique growth opportunities for SMEs
If you’re an entrepreneur, you may want to stay ahead of the game by making the most of some of the market trends right now.
Malik Khattou, CEO of Always Improving, says, “By staying up-to-date on industry developments and consumer preferences, businesses can identify unique growth opportunities and differentiate themselves in a competitive market. There are several key market trends that start-ups and small business owners in the UAE should be aware of to create unique growth opportunities.”

According to Khattou, these trends include:
• Digital transformation: The Covid-19 pandemic has accelerated the adoption of digital technologies in various sectors. Businesses that can leverage digital tools to improve their operations and customer experience will have a competitive edge.
• Sustainability: There is a growing awareness and demand for sustainable products and practices in the UAE.
• Personalisation: Consumers are increasingly expecting personalised experiences, from products and services to marketing and communication. Businesses that can tailor their offerings and interactions to individual customers’ preferences and needs can build stronger customer loyalty and increase sales.
• E-commerce: The e-commerce market in the UAE is growing rapidly. Businesses that can offer seamless and secure online shopping experiences can tap into this trend and reach a wider audience.
• Partnerships: Having strong partnerships will lead any small business owner to success.
Business laws and regulations at a glance
Syam P Prabhu, Founder and Managing Director of Aurion, talks about a few rules start-up owners must be well aware of for successfully operating their business in the UAE.
• UAE Commercial Companies Law applies to any entity involved in commercial, financial, industrial, agricultural, real estate, or other kinds of economic activities in the UAE.
• UAE Labour Law explains the rights, duties, contracts, and remedies for employees and employers. It governs employer-employee relations in the private sector.
• Customs Law describes the common customs law of GCC as well as the custom policies of the emirate in which the company is established.
• VAT legislation in the UAE states that a 5 per cent Value Added Tax shall be imposed on every taxable supply and deemed supply made by the taxable person.
• A corporate tax of 9 per cent will be implemented from June 1, 2023, to UAE businesses subject to their modus operandi of business.
• Economic Substance Regulations (ESR): The companies that are within the scope of the ESR regulations are required to submit the notification and ESR report to the regulatory authority. ESR applies to all licensees and exempted licensees doing any of the ‘related activities’ mentioned in the law.
• Ultimate Beneficiary Ownership (UBO) Declaration: This increases corporate transparency. New and existing companies in a free zone and the mainland have to notify the respective authorities and also always maintain their UBO register and supporting documents.
• Free zone regulations: Each free zone has its own rules and regulations developed within the general framework of federal laws of the land.
• Law of Bankruptcy provides a legal framework to address distressed companies in the UAE while helping them avoid bankruptcy and liquidation through various mechanisms like financial restructuring.