Dubai, one of the capital cities of the United Arab Emirates, offers numerous opportunities for entrepreneurs and investors. If you too are thinking of opening a company in Dubai, the Free Zones, established by a law in 1990 specifically to promote foreign investment, can offer you great opportunities.
But what is it all about? What are the bureaucratic and tax advantages? And what are the necessary steps to set up your business in the Dubai Free Zones?
Free Zones Dubai: what they are
The Free Zones in the United Arab Emirates are free trade zones whose regulations facilitate foreign investments thanks to easier taxation and leaner bureaucracy. This is why the Free Zones in Dubai are the perfect location for Italian entrepreneurs who are thinking of moving or opening a company abroad.
Free Zones are free zones where entrepreneurs can operate in freedom. Each Free Zone is aimed at a specific activity and offers specific licences, linked to a specific sector.
Opening a company in the Free Zones in Dubai is relatively easy, both in terms of setting up a Free Zone Company (FZCO) and a Free Zone Establishment (FZE), i.e. a branch of the foreign parent company.
What are the Free Zones in Dubai?
Free Zones are present in all seven states of the United Arab Emirates, but especially in Dubai. In fact, there are 27 different Free Zones in the capital's territory:
- Dubai Airport Free Zone, an area specialising in international import-export companies.
- Dubai Auto Zone.
- Dubai Cars and Automotive Zone.
- Dubai Design District Free Zone.
- Dubai Flower Centre Free Zone.
- Dubai Gold and Diamond Park.
- Dubai Healthcare City Free Zone, the benchmark for companies operating in the health and wellness sector.
- Dubai Industrial City.
- Dubai International Academic City.
- Dubai International Financial Centre, an international financial centre that houses businesses operating in the banking sector.
- Dubai Internet City Free Zone, the benchmark for companies operating in the digital and communications world.
- Dubai Knowledge Park.
- Dubai Logistics City.
- Dubai Maritime City Authority.
- Dubai Media City Free Zone, the UAE's media and telecommunications hub.
- Dubai Multi Commodities Centre, ideal for any commercial activity
- Dubai Outsource Zone.
- Dubai Science Park.
- Dubai Silicon Oasis Free Zone.
- Dubai South, where you can set up your company without having to attach any type of visa to your application. The visa required for the other Free Zones is a photocopy of the entry visa in your passport showing that you have travelled to the United Arab Emirates at least once in the past
- Dubai Studio City.
- Dubai Techno Park, also known by its new name National Industries Complex.
- Dubai Textile City.
- Energy and Environment Park.
- International Humanitarian City.
- Jebel Ali Free Zone Authority, specifically for companies involved in sustainable infrastructure. From 19 companies in its early days, today there are more than 7,000 companies in this area of the country, the JAFZA offers great opportunities to companies in the sector, including the advantage of requiring a minimum capital of zero.
- Jumeirah Lakes Towers Free Zone, one of the fastest growing areas. Growth is particularly related to businesses operating in the commodities sector.
- Dubai Production City.
To understand which Free Zone is best for your business and how to get the best compromise between tax benefits and services offered, the best choice is to seek advice from professionals who will be able to direct you.
Consider it part of your investment and a strategy to further reduce costs.
Are there Free Zones outside Dubai?
Although the Free Zones are mainly concentrated in Dubai, areas with the same characteristics can also be found in other UAE cities.
Abu Dhabi, the nation's capital, is home to 1 million people. It is the seat of national government and, like Dubai, has undergone exponential growth in recent years.
Abu Dhabi has four free zones:
- Abu Dhabi Airport Business City.
- Abu Dhabi Media Free Zone.
- Masdar City.
- Khalifa Industrial Zone.
Setting up a company in the Free Zones: what are the advantages?
- 100% ownership of the company: If you open a company in the UAE, based outside the Free Zones, you are required to have a local partner who owns 51% of the company shares. In the Free Zones, on the other hand, you have 100 per cent ownership of your company, without the obligation to have a local partner.
- No taxation on personal or corporate income (guaranteed for 15 to 50 years, depending on the area).
- No taxation on capital gains, nor on corporate income.
- No restrictions are placed on currency movements.
- No taxation on repatriation of invested capital.
- Streamlined bureaucracy: not only is it easier to open a company in Dubai, but also the hiring of collaborators and employees takes place with simpler procedures that facilitate the growth of the company.
Opening a company: requirements
To set up a company in Dubai, you will have to fulfil certain regulatory requirements.
The basic requirement is the specific licence. There are different types of licences and, depending on the sector in which your company operates, you will need:
- A business licence: to open any kind of business in Dubai.
- An industrial licence: to open industrial activities.
- A professional licence: to open freelance activities or service providers.
How are business licences obtained?
All these business documents can be obtained from the Department of Economic Development in Dubai.
The only exception is if you need a licence for a tourism-related business activity: in this case you will have to apply to the Department of Tourism and Commerce Marketing, also in Dubai.
The second requirement is to be registered with the Chamber of Commerce. How to do this?
Opening a company in Dubai, Chamber of Commerce registration: how to do it?
- First of all, you have to obtain prior approval for the incorporation of a company from a local notary.
- To obtain it, you must first submit your company name to the Ministry of Economic Development (DED), also specifying the type of company and the names of the shareholders.
- Open an account in a local bank and deposit the minimum share capital.
- Acquire the trade registration certificate and trade licence.
- Regularise the tax part with the help of an accountant (the accountant will also be needed to draw up the certificate to be submitted to the DED).
- Send some documents to the Chamber of Commerce:
- Application form.
- Memorandum of incorporation of the company or business activity.
- Certification by the accountant.
- Preliminary Approval Letters.
- Letter from the DED.
To avoid mistakes at this stage, it is advisable to rely on experienced consultants who know their way around the territory and language.
Setting up a company in Dubai: costs
Setting up a company in one of Dubai's Free Zones - or in another country of the United Arab Emirates - is indeed advantageous not only from the point of view of bureaucracy, but also from the point of view of costs.
In addition to the cost of renting or buying office and premises and any expert advice, you will also have to take a number of factors into account.
First of all, it must be borne in mind that a minimum amount of capital must be deposited in a bank in the Arab Emirates. It will then be mandatory to open an account and deposit an amount ranging from zero to a few tens of thousands of euros, depending on the Free Zone and the type of company or business.
Despite this, the costs of opening a company in the Free Zones remain lower than those of opening a company in Dubai, but in an area outside the free zones. In this case, in addition to the minimum share capital, you will have to also invest capital for hiring a local partner (compulsory outside free zones) and take into account a 20% tax.
In the Free Zones, the cost of VAT is at 5%. Opening a company in the Free Zones also means being able to take advantage of advantageous tax rates. If you want to move to one of these zones, you can also take advantage of the fact that the purchase of basic necessities in the Free Zones is tax-free.
Setting up a business in Dubai: how long does it take?
Once all documentation is submitted, you can obtain the necessary visas to set up your company in Dubai within a few working days. Some occasional delays may occur, but only during holidays Some delays only occur during holidays or Ramadan.
From this point of view, our consultancy can be very helpful: not only does our experience allow us to shorten the time but we are also able to advise you on the best solutions for your business.
Opening a Limited Liability Company in Dubai: disadvantages
To fully understand why Free Zones should be your benchmark for opening a company abroad, let us see what differences and disadvantages exist when you decide to open your business in Dubai in a non-Free Zone.
When you decide to open an LLC outside the free zone, not only are you obliged to do business with a local entrepreneur, but the law also stipulates that the local partner must have a majority share in the company's capital.
If you want to open your Limited Liability Company outside the Free Zones of Dubai, you will therefore have to resign yourself to being the minority partner of your company.
One must also bear in mind that the cost of living, running offices and all other material aspects of running a company are higher in an area outside the Free Zones, because taxes are generally higher.
Can I open an LLC in a Free Zone?
If for your type of business you are forced to open a limited liability company but do not want to give up the Free Zone benefits, there is no problem: you can open your LLC also in Free Zones.
These are the main types of companies you can open in Dubai:
- FZ LLC: an LLC is similar to our limited liability company, all shareholders are therefore liable for the debts in uci the company incurs.
- FZCo: if there are several partners.
- FZE: if there is only one partner.
The limits of an offshore company in Dubai
The offshore company is another viable alternative to setting up a business in a Free Zone, provided your business is compatible with this mode.
You can enjoy bureaucratic simplification and virtually no taxation even with the offshore option, but this is only applicable for business outside the jurisdiction of Dubai.
If you set up an offshore company, therefore, you will not be able to rent or buy an office in the country and you will not be able to hire staff there.
Opening a company in Dubai: frequently asked questions
Can I open a company in Dubai without moving from Italy?
This is another advantage of opening a company in Dubai in the Free Zones: it is possible to handle the entire company formation without actually travelling to the United Arab Emirates.
Generally, however, it is required that the partner(s) of the company to be established have been to the United Arab Emirates at least once: a photocopy of the passport with the latest entry visa must be provided when submitting the documents and application.
Some Free Zones allow you to start a business without needing to attach any kind of visa: Dubai South is an example, although costs here can be higher than elsewhere.
Do I have to be resident in the UAE to set up a company in Dubai in the Free Zones?
If you are not resident in the United Arab Emirates but want to open a company in Dubai, know that you have every right to be sole director of your company, even without being a resident.
Administrator status, however, gives you the opportunity to apply for residency in Dubai, thanks to which you can obtain additional benefits.
Can you open a branch office for your business outside the Free Zone?
Absolutely. You can open an office in a territory outside the Free Zones, within the UAE, but also abroad.
Are there customs fees for shipments between the Arab Emirates and Italy and vice versa?
Customs taxes for shipments between the UAE and Italy are 5%, but some products are exempt: products that are only in transit or products that enter the country to be processed and then shipped back fall into this category.
As a director of a company in Dubai, am I obliged to pay social security contributions?
There is no social security system in the UAE, so the costs of setting up your business are further reduced.
Does working in Dubai mean operating in a completely westernised society?
The process of westernisation of the Emirates has been incredibly fast, but still hosting so many people and foreign activities and while attracting investors from all over the world, the Emirates remain a Middle Eastern and predominantly Muslim state.
Why is this important to know?
The behavioural rules that are adopted in this state are different from ours. If you do business in Dubai, you have to know your way around from a bureaucratic and fiscal point of view, without neglecting the behavioural one.
You should know, for example, that in order to purchase alcohol you will have to obtain a specific permit, and you will have to consume it exclusively in your residence.
You should also know that there is zero tolerance for drink driving (fines can be high, even thousands of euros) and for drug use (in addition to fines of thousands of euros, in this case you can even be arrested).
Is life and work in Dubai influenced by religion?
The most widespread religion in the Emirates is Islam, but every foreigner is free to profess his or her own religion. Emiratis expect, of course, not to be judged by foreigners either for their customs or their religion.
The Islamic religion influences the life of Muslim Emiratis, in their diet and the organisation of their day (Muslims pray five times a day, for example), but religion certainly does not influence the life or habits of a foreigner who professes a different religion.
Do you want to set up your company in Dubai? With our consultancy you can take advantage of every advantage offered by the country's free zones. Apply now!
Conclusion: is opening a company in Dubai really convenient?
Absolutely. Both bureaucratically and - above all - fiscally.
There are no taxes on all types of foreign income (licence fees, royalties, fees). Import or export taxes are open at 5% or nil, while VAT is set at a fixed rate at 5% and is absent in free zones on essential goods.
The advantages for your business are also bureaucratic, thanks for example to the possibility of obtaining licences in just two or three working days.
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