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Hello, fellow business enthusiasts! There’s enough you can learn about creating a business in any of the free zones in Dubai which is exactly what I am going to do for you. Having been through this process myself, I do say that it is a fascinating process full of opportunities and yes, a few hitches. But fear not, I will be taking you through all of it painstakingly. So go and prepare a cup of coffee or tea and join me as I make a tour in the Dubai free zones!
What is a Dubai Free Zone?
Well, what are these zones you may ask me? Ideally when I heard of free zones, I was just in a puzzlement as well. But such free zones are crucial for international companies. You will understand this once you grasp their concept.
Overview of Free Zones
Imagine that there are separate geographical locations within Dubai which allow full ownership of your business, no corporate tax, and relaxed laws. Too good to be true right? It is in fact true because this is the case with free zones. They are specially earmarked lands that have been set out in regions for the purpose of encouraging direct foreign investments and hence boosting the economy.
Establishing my tech firm in Dubai Silicon Oasis was something that left me delighted because of the various incentives. I saw no taxes on imports or exports; all the profits and capital could be taken out – it was truly the best fantasy for any entrepreneur!
Free Zone vs Mainland
Now, you may have been asking yourself, “so what’s the difference between setting it up in a free zone and on the mainland?” Great question! The main differences are in the ownership rights which come with setting up a business, tax benefits as well as operational restrictions.
Free Zone
Pros:
- Foreigner can own the company 100%
- No customs taxes imposed
- Lesser complexities
Con:
- Suitable only for business which is purely international oriented
Mainland
Pros:
- The advantage is that one gets to the local UAE market which is a good catch.
Con:
- May cause the need for local sponsorship in some activities.
I remember discussing this point with my business partner. We eventually settled for a free zone because we were going to have ownership and tax benefits, even though restrictions were placed on local trading.
Classifications of Free Zones in Dubai
Free zones in Dubai are numerous, and each of them targets a particular economic sector. It is like going to a business opportunity buffet!
Free Zones By Coverage
Let us look at some of the major players in this sector.
- Dubai Multi Commodities Centre (DMCC): This is the best place for commodities business and others related to its movement. I have a friend who operates a diamond trading company in this zone and he praises it.
- Dubai Silicon Oasis (DSO): I am a craze of technology, and this is the place where I established my office. This one is also good for technology startups as well as IT-based companies.
- Dubai International Financial Centre (DIFC): This one is dedicated to everyone whose profession relates to finance.
- Jebel Ali Free Zone (JAFZA): This one is good for production as well as export businesses.
- Dubai Airport Free Zone (DAFZA): This one is good for airport and other logistics-related industries.
Factors for Selecting a Free Zone
Choosing the appropriate free zone is very important. It is akin to looking for the best site for building a new house; you have to consider everything!
When I was making those decisions, for example, I looked at:
- My sector (tech industry - in my case)
- The type of business activities I wanted to carry out
- Distance to key places such as airports or ports
- Cost structure
Pro tip: Make sure you go deep down in your analysis of the free zone specializations. It can prove to be extremely valuable concerning the network and support that you will be able to utilize.
Steps to Establish a Company Under Dubai Free Zone
Okay, let’s get into the details. Establishing a company in a free zone in Dubai is a lot like making an order with a complex menu – you will have to go step by step, though the outcome will be worth it!
Step 1: Selecting an Economic Activity
First things first, you have to select a business activity approved under the free zone that you have opted for. It is very much similar to selecting the character outputs in the computer application. It’s of foundational importance and sets the pace for everything that follows.
While I was in the process of establishing my technical consulting firm, I made sure that my business activities conformed to the approved business activity list of Dubai Silicon Oasis. Here it is important to be specific - some free zones might not accept "general trading".
Step 2: Select the Legal Structure
Next, after identifying your business objectives, you have to think about your legal structure. The main options are:
- Free Zone Establishment (FZE): This one is for the campaigns of sole entrepreneurs or single shareholders.
- Free Zone Company (FZCO): In case you want to join forces with someone, this would be appropriate.
I took the Free Zone company for my first business and it was great. However, there are merits and demerits for each structure with respect to the risk and control, and operating the company.
Step 3: Filing for a Trade Name
Now that’s the most interesting task, I would say, the task of assigning your company a name. But slow down, it's not just about coming up with a nice name. There is one more step that involves registering the trade name with DED or with the free zone authorities.
Pro tip: Make sure you check if the name you have been brainstorming is available before getting too attached to it. I have to say this because I suffered really hard and went back to square one when my first-choice name was already snatched away!
Step 4: Get the Initial Approvals
This is the point at which the paperwork starts to grow one’s neck. You will have to be making applications for initial approvals including:
- DED
- Dubai Municipality (and also regulations depending on your industry)
I won’t lie, this is the boring bit, worse only because it is necessary. Just remain calm, organized and you will manage to complete it.
Step 5: Solicit a Trade License
This is the last step! You will be required to acquire a trade license from either the DED or a Free Zone Authority. It's common for there to be the following three broad categories:
- Commercial License
- Industrial License
- Service License
- Freelancer License
Pick the one that fits your business activities most. And congratulations, once you get this, you are officially in business!
Costs of Setting Up a Business in a Dubai Free Zone
Let’s discuss cash, shall we? Yes, starting a business is expensive but being prepared can assist you to plan your finances better.
Business Setup Costs
When I was starting, some of the upfront expenditures gave me a real shock. You usually have:
- Charges for registration
- Charges for licenses
- Free zone authority service charges
- Legal translation and notarization
Particular low ball number ranges will depend on all those factors but in summary, if you are establishing a business, it will cost between AED 15,000 to AED 50,000 for the essentials.
Office Space Rental Costs
Office space products range in prices according to the free zone and type of setup one intends to have. A flexi-desk could cost you anywhere from AED 15,000-25,000 while a private office could range between AED 50,000 to over AED 200,000 in yearly rent.
I began with a flexi desk so as to cut down on expenses but as my business grew, I improved on the facilities. It is always a trade-off between being practical and looking professional.
Visa and Residency Costs
And most importantly, don’t forget about visas! These include provisions for:
- Your own residency visa.
- Visas for any other employees.
- Visas for dependents (who are usually the family).
These kinds of costs are recurring after every few years and even on renewals so make sure you include it in your budget, long term.
Pros of Setting Up a Business in Dubai Free Zone
Now, let's discuss all that good stuff now – the advantages of doing business in free zones!
100% Foreign Ownership
This one has stood out for me. Being the sole owner of my business at 100% without a local partner gives me absolute control and peace of mind.
Tax Exemption
No corporate taxes, no personal income tax, no excise taxes – do I need to say anything else? It is like a tax vacation. And never ends.
Promotions
In many instances, the ability to wire international funds without restrictions is a very advantageous thing. It gives you options to put back more into the business or even spend some time enjoying your earnings from it, wherever.
Visa and Residency Requirements
The issues of securing the visa is also very important especially because you have to be able to stay here in order to manage your business!
Application of Free Zone Visas
Why is this so? Because the procedure is more or less direct. You will apply via the free zone from which you are to apply for the above-mentioned Visas, and the logos of Visas are main gainful Visa status and the place of the Visas structure in some cases visa to the number of visas one eligible can principally due to office space use.
Employee Sponsorship
As your company expands over time, it is probable that you will have to process visa sponsorships for employees. It’s a tad bit of paperwork, but it’s not that cumbersome. Just be careful that you are not behind the deadline for the recent directives.
Family Sponsorship
Are you bringing your family with you? You can also provide them with a sponsorship. I brought my family which included my wife and kids but it incurred extra expenses. It was worth their presence though.
Legal Compliance and Ongoing Maintenance
Staying compliant is one of the keys to ensuring that the business is run without any hitches in a free zone.
License Renewals
A renewal of this trade license will be done every year. This process is often very easy but do not ignore it grabbing the renewing license is costly especially for doing business with expired license.
Reporting and Accounting Requirements
Order your books! Depending on your business size, you might be expected to file managed financial statements. And don't forget about VAT registration if necessary.
Employment and Labor Laws
Laws relating to the Labor UAE applies in Free Zones. Relevant domains such as employee contracts, working hours, health insurance legally advertised are expected to have been properly understood.
Challenges and Limitations of Free Zone Companies
It’s not all that easy – there are somewhat obstacles that have to be noted.
Limitations on Domestic Trading
This was an obstacle for me. Free zone companies cannot conduct trades within the UAE market unless they sell through a local distributor or an establishment of a mainland branch is done.
Managed and Controlled Business Activities
It is not uncommon for specific areas of business to be subjected to further regulation. If you happen to be in the business of healthcare, or finance let’s say you might be having additional requirements to meet.
Structural Operating Model
In the course of your setup (virtual office vs full office) you may encounter restrictions on the maximum size of offices in terms of the number of employees to be accommodated. This is perhaps the wisest thing to do as you make plans for expansion.
Support for Companies in Free Zones
The good news, free zone businesses have such types in a vast variety!
Consultants for Business Setup
I strongly advise you to avail yourself of the consultant’s services especially when trying to set up a business in Dubai for the first time. They can really save you time, money, and a whole lot of problems.
Government Funds and Other Related Measures
Make sure to look for other government measures of this kind such as Dubai SME. Such funding is provided for Startup Support and Small Medium Enterprises.
Provision of Incubators and Accelerators
Recently launched programs like in5 Tech and Dubai Future Extractors are worth the use. They provide mentorship, workspace, and sometimes even funds.
Conclusion
Wow! I can't believe how much information we have learnt so far. Setting up a business in one of the Dubai free zones is such a thrilling adventure. There may be difficulties, yes, but the chances are breathtaking.
Understand that no two business journeys are the same. If an approach worked for me, it may not work for you. However, finding the right balance requires due diligence, advice when necessary, and adaptability.
I trust this outline will have provided you with a clear picture of what your Dubai free zone experience may entail. If you have any questions or even wish to talk about what you yourself have gone through, feel free to leave a comment. I will be happy to hear from you!
Best of luck in starting your business. And someday, who knows, maybe I will meet you in Dubai in the near future!