Top 5 Reasons to Start Business in a Free Zone in Dubai

Top 5 Reasons to Start Business in a Free Zone in Dubai

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Out of some 45 free zones in the United Arab Emirates, about 30 of them are in Dubai. There is a free zone for just about every kind of business activity, and the advantage is that free zones offer dedicated infrastructure. For instance, the Dubai International Financial Centre, a free zone, is also home to the NASDAQ Dubai stock exchange. The Dubai Multi-Commodities Centre, another free zone, hosts the Dubai Gold & Commodities Exchange, making it an attractive destination for companies in this sector.

It is also not uncommon for large companies to be located in free zones. Global software giant Microsoft is located in the Dubai Internet City, which is a free zone. There are several other advantages to being located in a free zone, and a free zone in Dubai can provide you with the right opportunities for growth. Someone experienced in matters of business setup in Dubai can help you ascertain the right free zone in Dubai for your business, as well as inform you how startup costs are comparatively lower.

1. Change your office without changing your address

One of the biggest advantages of doing business in a free zone is that you have the ability to scale up or down with ease, according to your operational needs. If you feel the need to scale up, you can move into a bigger, better office that is already fully furnished. Or you could move into a bigger semi-furnished office and do it up according to your tastes. So whenever you feel the need to hire more staff, you can move into a bigger office. Or a smaller office if you decide to outsource some of your business functions.

If business is doing so well so that you need a warehouse, you can always get one easily in a free zone. If you need a bigger warehouse – or a smaller warehouse – you could move into one that fits your current needs. For ease of doing business, you could shift your office to beside your new warehouse. There is a lot of flexibility to be had in a free zone, and they offer a range of options. Your mailing and correspondence address will still be the same, because your registered office address is your PO Box address.

2. No annual audit requirements and exemptions from taxes

There is also no need for free zone companies to have their accounts audited every year, which is mandatory for companies on the mainland. However, some free zones will still require you to have your company accounts audited every three years. But this still represents a major cost-savings in administrative fees. Depending on the size of your company, it could cost as low as AED 1000 for a single-person, single-owner company to AED 25,000 for a small to medium-sized company.

The audit fees will cost even more for a large company. A penny saved is as good as a penny earned, and even AED 1000 saved can be a sizeable sum for a single individual running his/her own business. So opening your company in a free zone makes a lot of sense financially. You also do not have to pay the 5% Value Added Tax for doing business with a company in the same free zone or in another free zone. A company located on the mainland does not possess this advantage.

A company located in a free zone has to pay 5% VAT only when doing business with an individual or another company on the mainland. Even then, VAT registration is not required as long as the volume of your business does not cross AED 375,000. This makes a free zone ideal for small businesses. For medium-sized and large companies, the savings from not having to pay 5% VAT on transactions with other companies located in free zones are considerable.

All these savings make free zones ideal for companies of any size.

3. Freedom to repatriate your capital and profits

In the United Arab Emirates, there is no requirement that you should keep any percentage of your invested capital or profits within the country. You can repatriate your invested capital and profits as much as you want, when you want. What is more, there is a lot of freedom to be had when it comes to international transactions. You can transact business in USD, GBP, EUR or any major international currency. The UAE Dirham is pegged to the US Dollar, so this lends itself to a very stable business climate as well.

4. Exemptions from import and export duties

A company located in a free zone is not required to pay any import or export duties. So you could import goods for sale in the United Arab Emirates without having to pay any import duties. You are also free to import equipment and machinery from overseas for your own operations, and you still do not have to pay any import duties. This can be a major advantage to have for those running industrial operations in a free zone. There are also no export duties whatsoever for companies located in free zones.

Both these factors make free zones in the United Arab Emirates an attractive destination for those in the re-export industry.

It is not uncommon to companies to import items from one country, apply the finishing touches and export them overseas. Some import raw materials and assemble them in free zones before exporting them, while some make only minimal changes. For example, several countries require that perfumes be labeled according to their packaging norms. Some companies in free zones import them in bulk, change the labelling to meet the norms and export them to their clients abroad, without paying any import / export duties.

5. Exemption from labour restrictions

On the mainland, companies in the private sector have to ensure that 10% of their workforce is made up of Emiratis*. This rule came into effect in September 2021, and employers have five years to comply. For the first year, they have to ensure that at least 2% of their skilled workforce consists of Emiratis. Earlier, it was only 2% for the trade sector, 4% for the banking sector, and 5% for the insurance sector. Moreover, it was applicable only to companies that had staff of 100 or more on their payroll.

*This is the term accorded to those who are citizens of the United Arab Emirates.

In a free zone, companies do not have to comply with this requirement. You can hire staff of any nationality, and there are no minimum wages specified for any role in the United Arab Emirates. So you do not have to worry about finding suitable Emirati staff for your company. You can employ whoever is qualified for the position and who you think has the potential to be an asset for your company. It may be noted that you have to add 100 square feet of office / commercial space for every employee you plan to hire.

Need Help Setting Up Your Business in a Free Zone?

A&A Associate is a business advisory firm that has years of experience with business setup in UAE free zones. We are backed by an exceptionally strong in-house legal team, and we also offer cost-effective accounting solutions to our clients. We have been of assistance to clients from 100 countries around the world, and we have a 98% client satisfaction rate so far. 

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