Strategy

What Are The Pros And Cons Of Starting A Freezone Company In UAE?

by The TSW Team

United Arab Emirates has been the destination of expats for establishing a new business for a long time. Governmental authorities are also supportive of businesses and have policies aiding growth of the business. Attracting nationals across the globe to the UAE for setting up their business. In this blog post we are looking into “What Are The Pros And Cons Of Starting A Freezone Company In UAE?”.

The UAE offers three types of business setups viz. Mainland, Freezone, and Offshore. Each type of business setup in Dubai has its pros and cons. The field of business is one of the criteria whilst choosing the company setup. The majority of the business owners seek support from professional agencies in establishing their firms in the UAE. Freezone Companies have some additional advantages compared to the remaining two.

There are more than 30 free zones located around the UAE. Each free zone is independent and hence each one has its own rules and regulations. The companies in Freezone have to follow the guidelines. In addition, each free zone has stipulations regarding the type of business permitted to be established.

Business Set up in Dubai Freezone has several advantages that are conducive for the growth of the organization and earning better profit. However, understanding the all-around details of the Freezone company setup is compulsory to reap the maximum gain.

The Pros of Starting a Freezone Company in UAE

The benefits of starting a Freezone company have been attracting many businesspersons to Dubai and other parts of the UAE. We have tabulated those, for the expats to have an in-depth understanding of the advantages before venturing into it.

  • You OWN the Company – A company in Freezone means you can have 100% ownership of the company, which is not the case with a Mainland company. An ex-pat establishing a Limited Liability Company (LLC) can have 49% of shares only. The local Emirati, who will act as the sponsor of the company, will own 51%.
  • Tax Rebate – A BIG advantage it is. The Freezone Company is exempted from all kinds of export, import, and corporate taxes and customs duties.
  • Maintain Confidentiality – You can maintain the data about the Freezone company a secret. You do not have to reveal the asset information and other statistics to the authority.
  • Favorable Rules for Visa and Accommodation – The owners of Freezone companies can recruit employees as they wish and obtain visas for themselves, their employees, and relatives without much hassle.
  • Unlimited Business Transactions – You can conduct business with both domestic and international companies without any limitations.
  • Excellent Infrastructure – Freezone region has advanced infrastructure facilities that are conducive for the growth and development of business firms.

The Cons of Starting a Freezone Company in UAE

As there are advantages of Freezone Company, there are disadvantages too. The cons of starting a Freezone Company in UAE are described below.

  • Limitations in Jurisdiction – The company in a particular Freezone cannot expand itself to the territory beyond the Freezone. Thus causing a limitation concerning expansion.
  • Restrictions in Business – The Freezone Company is not authorized to get into business with mainland companies and individuals onshore inside the UAE.
  • Specific Businesses Only – Each Freezone has some stipulated business fields. The companies in that Freezone can opt for those businesses only. You are not entitled to establish any business in any Freezone you want.
  • Office Space Rent Maybe on the Higher Side – Since the businesses have to remain confined in the space allocated, you will have to pay the rent sought. Many a time, the rent will be on the higher side. Hence, the turnover must be adequate for the existence of the business.

As we weigh both the pros and cons, it could be ascertained the establishing a business setup in Dubai Freezone will be beneficial. Though, every business will not be profitable in the Freezone. You may have to study the business possibilities before considering a Freezone company. Not every company will be profitable in the Freezone.

Setting up a Freezone Company in UAE could be a bit more complicated than setting up an offshore company. The procedure for obtaining initial approval and business license are also different. The basic requirement for commencing a free zone company in UAE includes a capital, as stipulated by the particular Freezone, approval from the competent authority, invoice statement, and bank account.

Although the legal formalities may appear complicated, it could be accomplished in quick succession with the support of professional business setup services. They have adequate experience in supporting companies in UAE. And they know the in and out of the process. Further, the approval procedure of the Freezone Company is quicker than the other types of companies.

Consulting a professional business setup service will be ideal to understand the pros and cons of the Freezone business in detail. So that you can decide upon the way ahead subsequently. Besides, the business set up firms in Dubai will help you to complete formalities towards obtaining initial approval and trade license.