Dubai, being the business capital of the region attracts a lot of interest from potential investors and entrepreneurs. If you are thinking of starting your own business in the city, there are quite a few things to consider before opening a free zone office in Dubai. The idea is to identify which option would best suit you and your business needs. Free zones, in particular, are preferred by foreign investors. Despite this, there is a lot of confusion about what a Dubai free zone actually is and how can one run a business in Dubai free zones.
Benefits of opening a business in Dubai Free Zones
So what is a Dubai free zone and what are the benefits of starting a business in Dubai’s free zones? Simply put, Dubai free zones or FZE in Dubai are government initiated economic zones that offer tax concessions, custom duty benefits and other incentives for foreign investors. Furthermore, Dubai free zones offer zero corporation & personal taxes, full repatriation of profits, sole ownership, no currency restrictions as well as total import and export tax exemption. These special rules and regulations were set out by the government to create such free zones in Dubai. So there are undoubtedly multiple reasons for anyone to make an investment in a Dubai free zone. In addition to this, until recently, non-free zone businesses required a local sponsor who owned 51% of the business. Dubai free zones allow foreign investors to have complete ownership of the companies. These laws have been amended recently, but there is still a large number of foreign investors who prefer operating from free zones in Dubai because of the enviable tax benefits.
How to start a Business in Dubai Free Zones
Many people ask, how do we start a business in Dubai free zones? Below are a few steps and subsequently the detailed explanation of the things to keep in mind before starting a business in Dubai free zones.
- Examine the legal entity your company would be
- Select a company name
- Apply for a business licence
- Choose an office space to open a business in Dubai free zones
- Get pre-approvals, register your business and get your licence
Types of Free Zones in Dubai
Free Zones in Dubai are of two types
- Free Zone Limited Liability Company (FZ LLC) or Free Zone Company (FZ Co.)
- Free Zone Establishment (FZE)
The difference between the two is in the number of shareholders and their legal status. Each Dubai free zone has a unique set of rules and business owners must ensure that the company’s position matches the legal requirements of the particular zone they are targeting. Before you are granted permission to run a business in Dubai free zone, you have to meet the legal requirements.
There are over 30 different free zones in Dubai and the number is constantly growing. Here is a list of popular Dubai free trade zones.
- Dubai Airport Free Zone (DAFZA)
- Dubai Design District
- Dubai Healthcare City
- Dubai International Academic City
- Dubai Internet City
- Dubai International Financial Centre
- Dubai Knowledge Park
- Dubai Media City
- Dubai Gold and Diamond Park
- Dubai Multi Commodities Centre (DMCC)
- Dubai Silicon Oasis (DSO)
- International Media Production Zone
- Jebel Ali Free Zone
- Dubai Production City
- Dubai World Central (Dubai South)
- Dubai Studio City
The type of business and licensing for opening a business in Dubai free zones
‘When you fail to plan, you plan to fail.’
Before taking any concrete steps towards opening a business in Dubai free zones, it is imperative to first identify the business you want to run. Only then you can make the most of this opportunity. Ask yourself if you wish to be a freelancer or you want to start a company and hire staff. Not all Dubai free zones allow freelancers. However, applying as a freelancer costs money. Second, you would have to find out what type of licence you need for your business. Dubai free zones allow multiple operations under one licence. However, those operations or activities have to come under the same licence as defined by the permit issuing authority.
Selecting an appropriate name for the business
Naming your business is a complex decision, which can sometimes make or break your business. You have to consider its emotional appeal. The name should attract the market segment you want to target. However, you have to adhere to some naming conventions. The primary step is to check if the name is available for registration. You can do it online via Emirate government’s website or take experts on board. Names with religious or political references are not allowed.
Selecting the right free-zone
The choice of your Dubai free zone is pivotal to the future of the business. The first step is to identify the type of business you want to run. Depending on this, your second step is to determine the Dubai free zone most suited to your business. Some free zones in Dubai only allow selected sectors to operate. You have to choose the Dubai free zone according to the product or service you want to sell in the market. For instance, if you are looking for a media license, you will have to contact the authorities at the Dubai Media City free zone, while those interested in outsourced operations would have to look at the Dubai Outsourcing City.
Even from the potential view of operations, due diligence is necessary. It would be harder to succeed in a zone which is known for some other sector. The sales push would be harder and supply chain costs would also go higher. On the flip side, if there are too many similar options available, the market could be deemed saturated. Hence, one has to consider all these factors before deciding to open a business in Dubai free zones.
Free zones are planned in a way that you easily find suitable business and residential properties. For example, Silicon Oasis which is a free zone itself is a 20-minute drive from the Dubai Airport Free Zone. You can rent a luxurious flat in Silicon Oasis, to operate your business in either Dubai free zone. Similarly, there are other Dubai free zones which offer office spaces such as Jebel Ali Free Zone, which has a good selection of commercial spaces and warehouse rentals.
Documents required to establish and register your company
Along with acquiring office space in a Dubai free zone, you would have to formally register the business by submitting your application. For each license, Dubai free zones have specific demands. However, as a general rule the following documents are required for pre-approval:
Documents required for pre-approvals for opening a free zone business in Dubai
- Colour copy of shareholder(s) passport and visa if applicable
- Application form
- Business plan
- Copy of existing trade licence/registration certificate (if you are an existing company, applicable for a local company only)
- Specimen signature of the company’s shareholder/s and the appointed Manager/Director for the new company
- Audited financial reports of 2 years or certificate of reference from a personal bank of the individual shareholder
- NOC from current sponsor (for individuals)
- Unit title deed
- Letter of Intent
- Registry Identification Code Form (RIC) for Manager/Director (Original and notarised)
Freelancers have a different set of requirements. They only need to submit the application form, RIC, CV and bank reference letter.
General Documents required for registering a free zone business in Dubai
Once the pre-approval comes through, the following documents should be submitted to register your company in a Dubai free zone.
- Completed application for registration
- Board Resolution appointing Manager/Director (Notarised and attested)
- Power of Attorney given to Manager/Director (Notarised and attested)
- Memorandum and Articles of Association (Notarised and attested)
- Specimen signature of Manager/Director (Notarised and attested)
- Passport-size photo of Manager/Director against white background
- Share capital information
How to open your corporate bank account
To open a business in Dubai free zones, you would need a corporate bank account. You would require the following to open a company account:
- Corporate bank account opening form
- A board of directors’ resolution sanctioning the opening of the account, and the signatories to the account
- Share certiﬁcates (copy)
- Company’s incorporation certiﬁcate (copy)
- Company’s memorandum and articles of association (copy)
- Passports for all company partners (copies)
Each bank has set eligibility criteria. Some banks also have a minimum cash balance which can range from AED 5k to 200k.
Share capital or money required to open a business in Dubai free zones?
How much money do I need to open a business in Dubai free zone? This is another frequently asked question. The fact is each Dubai free zone has its own set of rules for share capital. For example, Jebel Ali Free Zone has no minimum requirement for share capital. However, a company must have sufficient share capital to ensure funding for licensed activities. The minimum share capital for the DAFZA is AED 1,000.
Similarly, DMCC requires a minimum share capital of AED 50k for each company and AED 10k for each shareholder. So, the money needed to start a business in Dubai free zones depends on the zone and industry you select. Do your maths, carefully before starting a business in Dubai’s free Zones.
Opening a branch of an existing business
A lot of business owners are looking to expand and open new offices in Dubai’s free zones. This is allowed according to the rules of business set by the government.
To surmise, it could be said that Dubai’s free zones experiment has worked wonders. They were created to attract foreign direct investment, and they have successfully achieved that purpose. Many foreign investors and business owners have profited from this policy. This has helped residents of Dubai by creating employment and wealth.
However, you have to be astute in your approach and go through a rigorous process of due diligence before making any critical decisions. Starting a business in Dubai free zone might sound easy, but a lot of hard work needs to be put in. Take a look at our detailed guide for more information on the free trade zones in Dubai.