What is Free Zone and How to Setup in UAE?

Currently, in UAE, 40 free zones are operating, and more are now under construction. Each free zone has several designated commercial categories and offers licenses to the companies within these categories. Here is what you need to know about Free Zone UAE and how you can set up one.

What is a Free Zone UAE?

UAE free zones are the areas designed for businesses by the government to encourage prospective investments worldwide. Here the expatriates are allowed to own and operate their businesses altogether. The free zone UAE company registration is an initiative for business investment for all expatriates worldwide.

The UAE’s free zones have become the region’s major trading hub because of the support of the UAE government and free zone authority. Anyone in a hassle-free manner can set up the UAE free zone company. Within an affordable price of company registration, a minimal opening fee of AED 11,900 is required for opening a free zone company.

The UAE has over 40 different free trade zones through which businesses can be conducted. While it is commonly believed that a free zone company is an offshore company, regardless of the similarities, there are differences.

How to Setup a Business in Free Zone Dubai, UAE?

Because of the benefits and support offered by the free zone authorities and the UAE government, companies don’t want to miss out on the chance to invest. If you’re going to set up a company in a free zone, here are some steps you need to follow.

1. Select the Structure of Your Company

The very first and most essential step in your entrepreneurial journey to making a place in the free zone is determining the ownership structure. Free zones give 100% ownership to all expatriates who want to begin a business. This is not available for those companies that are outside the free zone. The investors wishing to set up a business can register their company in the form of a free zone company or a free zone establishment in the free zone of UAE. While FZE has only one shareholder, FZC has two or more shareholders. These fall under the LLC limited liability company ownership yet are governed by the free zone laws they reside in, not under the UAE CCL, commercial companies law. The first step to starting your journey with a free zone is to select the structure for your company.

2. Select the Trade Name

The first step to establishing your brand or company’s presence is giving your company a name. You need to decide on a name for your new venture, but it’s best to consult the DED, Department of Economic Development, or that free zone authority that is governing your business. You need to validate your company name to see whether it complies with the established protocols for trade names, or if the name is already taken. Some of the trade name conventions are given below.

• The trade name should be followed by the entity’s legal form (FZC, FZE, LLC, etc.).
• The trade name shouldn’t be against the public order or morals of the country. 
• The trade name shouldn’t have the governing authority’s name, the names of the UAE, Emirates, or religious names.

3. Application for the Business License

Once you have decided on the trade name, you need to apply for getting a business license. This aspect covers the main processes involved in the venture’s activities. What services and products you want to link your business to will affect the license you acquire. Trade licenses are necessary because they are absolute proof or legal right for your business to operate in the UAE. Free zones such as SPC free zone offer several benefits with different business licenses for various activities.

4. Selecting an Office Space

In terms of the office space requirement, free zones do offer a lot of flexibility. You can either rent or buy the property needed to start your journey. The specifications and setting of your office are dependent on the type of business you have. Free zones offer plenty of office suits, covering different facilities and sizes based on need.

5. The Registration Process

After determining the office space, you need to move to the process of registration. The process is easy to comprehend and simple. To get registered, you must submit your application along with the specific documentation, trade license, and paperwork, after which you have to pay the licensing fee. Costs of setting the business on free zones aren’t as high as putting them on the UAE mainland.

Once your payment is complete, the process becomes smooth from here. The entry permits are issued for the non-residents are your business will then be legally established. The process doesn’t take longer than 4 weeks, paving the path for people to start their business in a free zone in UAE.

Required Documents for the Formation of Free Zone Company in the UAE

Before starting a Dubai Free Zone company, you need to get the following documents approved by the Arab embassy or the Gulf Cooperation Council.

• Application license form that has been duly filled. 
• Contact person’s business card.
• An outlay and copy of the business plan.
• Attested and notarized Memorandum of Association, MOA, and Articles of association, AOA.
• Business manager and partner’s passport copies.
• The license and bank reference letters of the existing partner’s company, if it is applicable. 

The Verdict

The free zone company in the UAE is a special economic area where investors can start their businesses with special trade conditions and tax-free status. Setting up a company in a trade-free zone in the UAE is rather easy and takes almost four weeks to complete the process. We have described the entire process above. We hope that it will help you understand the working of Free Zones in the UAE.