This is the second article in a series that covers in depth the differences between a Mainland license, Offshore license and Free Zone license in the UAE.
In this article, we explore the advantages and disadvantages of a Free Zone company.
UAE Free Zone Company Must-Knows:
Free Zones are incorporated within a designated jurisdiction in each Emirate. In a Free Zone, a registered company is allowed to do business inside the same free zone or outside the UAE. There are over 4o Free Zones scattered throughout the UAE.
For commercial licenses and trading of physical goods, the company cannot do local business directly. To trade in local markets, Free Zone companies must operate through a distributor and pay a 5% duty on the local market invoices.
Because of these restrictions, Free Zones are ideal for the entrepreneur interested in establishing a base in UAE (and yield tax benefits) for their international imports and re-exports, as marketing through printed media and door-to-door sales is greatly restricted with a Free Zone license.
Perhaps the biggest advantage to opening your company in a Free Zone is that 100% of your company’s shares are owned by you and no Local Partner is required, as is the case with a Mainland company.
Unlike a Mainland license, Free Zone licenses can be incorporated with or without a physical office. An additional benefit is that Free Zone companies have access to many resources within the Free Zone itself. For example, Free Zone authorities allow the licensees to use the common business center desks for a minimum of 5 hours per week.
Free Zones can also provide a safety net to new comers as initial costs of registration can be much lower compared to Mainland start-up costs. With unique and easy-to-use facilities like the “plug-in-and-go” business desks – known as Flexi Desks and Smart Offices – setting up a company in a Free Zone can be extremely affordable.
Generally, a Free Zone license offers two visas on the Smart Office package. However, some Free Zones in the UAE can provide up to 6 visas. If you require more visas though, then you must lease a physical office or warehouse to avail a greater number of visas.
As always, new entrepreneurs should seek advice from professional business consultants before making any big moves with their company. Insights and good advice