How to Set Up a Business in a UAE Freezone

Setting up a business in a freezone involves a few straightforward steps:

1. Choose a Freezone:
   Each freezone caters to specific industries. For instance, Dubai Multi Commodities Centre (DMCC) is ideal for trading and commodities, while Dubai Internet City (DIC) is perfect for tech startups. Research your industry's alignment with freezone offerings.
2. Select a Business Activity:
   Determine your primary business activity (e.g., trading, consultancy, manufacturing). Your choice will affect licensing requirements.
3. Submit Initial Application:
   Register your business name and submit your application to the chosen freezone authority. Ensure the name aligns with UAE's naming conventions.
4. Prepare Documentation:
   Required documents typically include:
   • Passport copies of shareholders
   • Business plan (in some cases)
   • No-Objection Certificate (NOC) if you're employed in the UAE
   • Proof of capital, depending on the freezone
5. Obtain Approvals:
   After submission, the freezone authority will review your application and provide initial approval.
6. Lease Office Space:
   Freezones often require leasing physical office space. Options range from flexi-desks to full offices.
7. Pay Licensing Fees:
   Fees depend on the type of license (trading, service, or industrial) and the freezone's regulations.
8. Receive License and Start Operations:
   Once all fees are paid, you’ll receive your license, and your business is officially operational.

Benefits of Setting Up a Freezone Business

1. 100% Foreign Ownership:
   Unlike mainland companies, freezone businesses allow complete foreign ownership without needing a local sponsor.
2. Tax Benefits:
   • 0% corporate tax (for most businesses until 2029)
   • No personal income tax
   • Easy profit repatriation
3. Industry-Specific Ecosystems:
   Freezones provide a collaborative environment tailored to specific sectors, offering networking opportunities and resources.
4. Simplified Legal Framework:
   Freezones have straightforward regulations and less bureaucratic red tape compared to mainland operations.
5. Support Services:
   Many freezones offer business support services like visa processing, banking assistance, and startup mentorship.

How to Avoid Taxes

1. Choose the Right Structure:
   Operating solely within a freezone ensures that your business profits remain tax-free, provided they don’t engage in mainland operations.
2. Leverage Double Taxation Agreements (DTAs):
   The UAE has DTAs with over 100 countries, enabling businesses to reduce or eliminate tax liabilities in both the UAE and their home country.
3. Stay Compliant with Corporate Tax Rules:
   From June 2023, a 9% corporate tax applies to profits above AED 375,000 for mainland businesses. Freezone companies can remain tax-exempt if their activities align with freezone regulations.

How to Obtain a Visa

Freezone authorities simplify the visa process. Here’s how it works:

1. Determine Visa Quota:
   The number of visas you can sponsor depends on your office size and lease agreement.
2. Submit Documents:
   Required documents include a valid passport, Emirates ID application, medical fitness test, and business trade license.
3. Apply for Residence Visa:
   Once approved, the visa is stamped on your passport, granting you and your employees the legal right to reside and work in the UAE.
4. Sponsor Dependents:
   Business owners can also sponsor their family members, subject to financial criteria.

Top Freezones in the UAE

1. Dubai Multi Commodities Centre (DMCC):
   Best for trading, commodities, and gold businesses. It’s been named the Global Freezone of the Year for several years.
2. Dubai Silicon Oasis (DSO):
   Perfect for tech startups and IT firms, offering modern infrastructure and innovation-focused initiatives.
3. Sharjah Media City (Shams):
   An affordable option for creative industries with competitive licensing costs.
4. RAKEZ (Ras Al Khaimah Economic Zone):
   Offers cost-effective solutions, ideal for startups and SMEs looking for affordable office spaces.
5. Abu Dhabi Global Market (ADGM):
   Specializes in finance and fintech, providing a regulatory environment aligned with international standards.

Cons of Setting Up a Business in the UAE

1. Restricted Mainland Operations:
   Freezone companies cannot directly trade or operate on the UAE mainland without appointing a local distributor.
2. High Initial Costs:
   Licensing fees, office lease costs, and visa expenses can be significant upfront.
3. Limited Flexibility:
   Some freezones have strict rules about business scope, requiring additional approvals for expansion or new activities.
4. Compliance Requirements:
   While simplified, businesses must adhere to annual auditing, renewal fees, and regulatory updates.
5. Economic Dependence:
   The UAE's economy is closely tied to global oil markets, making it susceptible to volatility despite diversification efforts.

Conclusion

Setting up a business in a UAE freezone is a strategic move for entrepreneurs seeking tax benefits, ease of operations, and access to global markets. However, it’s vital to weigh the pros and cons based on your business needs. For industries requiring flexibility or heavy mainland operations, a mainland license might be more suitable. Research thoroughly, consult experts, and ensure you comply with local regulations to maximize the potential of your UAE business venture.