When you plan to start a business in the free zone UAE, it is normal for you to look for the pros and cons of forming a company. First, however, you must take a detailed look at every critical factor beneficial for your business.
For the past many decades, the UAE government has played a proactive role in bringing foreign investors and encouraging foreign investment in the Emirates. As a result, UAE is growing exponentially, and its visionary government, business-friendly policies, and investor-friendly atmosphere are the primary reasons.
There are many tax-related and other financial benefits that the government provides to foreign investors. The UAE market has three different business jurisdictions – Mainland, Free zone, and Offshore. Investors can opt for any of the three jurisdictions based on their business activity, customers, and business goals while forming a company. There are both benefits and shortcomings associated with starting a company in these jurisdictions.
In this blog, we shall briefly understand the Free zone jurisdiction and the benefits associated with the same.
What are the free zones in the UAE?
Free zones are special economic regions or jurisdictions in the United Arab Emirates that issue licenses to business establishments for smooth operations. It also grants financial and tax exclusions to enterprises. UAE has over 40 Free zones in its 7 Emirates. The Free Zone Authority (FZA) is a government body in charge of a Free zone. FZA is authorized to look after all the pivotal activities associated with free zone license issuance and operations.
Below are the three types of business entities that investors in a UAE free zone can form:
- Free zone company (FZC)
- Free zone establishment (FZE)
- Branch of a business concern
Benefits of Forming a Free Zone Company
100% Foreign Ownership
One of the most evident benefits of forming a free zone company in the UAE is that complete foreign ownership is possible. This means that the foreign investor need not find a UAE national sponsor for company formation. Foreign ownership is achievable irrespective of the nationality of the investor.
No Currency Regulations
Imposed by the government, currency regulations are restrictions on the transaction of foreign currencies. However, free zone companies do not have any currency regulations, making financial transactions more relaxed in free zones.
Exemptions in Import and Export Duty
Free zones jurisdictions in the United Arab Emirates are exempted from import and export duties. Thus, it helps in encouraging international trade in free trade zones.
Free zones companies are entitled to 100% tax exclusion (excluding VAT), including income tax and corporate tax.
Benefits of Repatriation
Companies are qualified for full repatriation benefits in free zones that include company profits and create financial assets.
Staffing formalities are easy and cost-effective for companies free zones. They can recruit foreign nationals too.
You get readily available and ready-to-use office spaces in Free zone jurisdictions. These are most perfect for start-ups, small and medium-sized companies in the UAE.
Easy Company Formation
The company formation process is easy and straightforward here. You can obtain a license within few days compared to other jurisdictions.
Immigration facilities for free zone companies are hassle-free and time-saving.
Free zones in Dubai (UAE) are excellently equipped with the most updated communication systems with an impressive infrastructure, available at a reasonable price.