A foreign investor can set up a company in the UAE, either in one of the many free zones or on the UAE mainland. Free zone authorities are the government bodies that register and issue business licences to non-resident companies in the UAE free zone. Free zones allow corporate structures to have a physical presence in the UAE, allow 100% foreign ownership and offer prebuilt facilities and modernised one stop-shop registration and administrative services.
A freezone is a defined and isolated land or setting, with a special tax, customs, and imports regime, that is different from a mainland area. The main advantage of owning a freezone company is that as an expatriate, you can own the business 100% without having to give out any of its shares.
There are many advantages to establishing a company in a Free Zone, including:
There are also some additional benefits of trading within a Free Zone. Many Free Zones arrange regular training and networking events which are usually free to attend. Most have meeting rooms available to hire privately for a fee, and many will encourage members to share business opportunities within that Free Zone.
a) A freezone company can only conduct business inside is specific freezone or
outside of the UAE. It cannot provide its services or sell its products in any UAE
mainland UAE jurisdiction.
b) The restriction of local business through a distributor is mainly to differentiate the
business in the local market by mainland companies and freezone entities used for
import/export. A distributor that has a Mainland license can act as your local agent
and charge a certain fee which is lower than the 5% duty applicable on freezone
invoices, if they trade directly into the local market. In case the company chooses to
use a distributor, the goods should be shipped in through the distributor itself, if not,
a 5% duty fee is applicable for any goods exiting the freezone.
C) Marketing a freezone company can also be restricted as you are legally only
allowed to market your company inside the freezone, may that be face-to-face or
even handing someone a business card.
Compared to the Mainland, a freezone license is 100% owned by the expatriate. There is no need for UAE National partner/service agent. Note that mainland laws have changed recently to allow 100% ownership with a wide variety of activities.
Unlike the mainland, a freezone license can be incorporated with or without a physical office. Freezone Authorities allows the license holders to use a smart/flexi office usage but this restricts you on visa allocation usage.
Freezone companies are limited to a certain number of visas and this normally varies from 1-6 visa packages. If you require more than the allotted allocation, then you may be asked to rent physical space inside that freezone, this can be costly due to the limited supply but high demand of commercial space.
The main purpose of having a freezone establishment is for importing and exporting goods and freezone authorities usually do not need approvals from external authorities. However, any external approvals from governing bodies outside of your freezone, will not be entertained.
