It can be quite difficult making a good decision when you are a foreign investor given there are over 50 Free Zones in UAE to choose from. You really have to do your research and make a calculated decision before setting up a business in one of the UAE Free Zones. Keep in mind that all the Free Zones have their costs, different lists of permitted business activities, different location & facilities options, as well as different share capital requirements.
All of this can be quite nerve-wracking and give you a headache. Going to the internet will not make you any less stressed out given the immense amount of information out there. That’s why we are going to clear things up for you so you can choose the best UAE Free Zone for your business. Here are the steps you should take.
STEP 1: Choose a business activity for your business in UAE
Each Free Zone has its own specific set of permissible activities which are allowed to be performed within the particular Free Zone. There are also different rules in each Free Zone when it comes to how many business activities are allowed using the same business license. The more activities you choose, the more a license will cost. You will sometimes be required to get two or more business licenses for the same company. One hack for this is to choose several activities within one activity group and from the same license type, where you will not be required to pay any additional fees.
Let us look at an example to illustrate this. In the Dubai Multi Commodities Centre (DMCC) Free Zone, you are allowed to have up to six business activities under the same type of license. You will also have the benefit of not incurring any additional fees if the activity codes start with the same first two digits. When operating within the same Free Zone, you are allowed to have different types of licenses under certain conditions.
There are other stipulations that vary depending on what Free Zone you are targeting. For example, in the Dubai South Free Zone, you are unable to have a Commercial and Service license under the same company. These are just some of the important factors to consider. By law, you will be required to have different types of licenses.
Some of the most popular types businesses get are the Commercial (trading) license, Service (consulting) license, Production (manufacturing) license, E-commerce license, General Trading license, and Media license.
STEP 2: Choose the facility type your business will require
You will need to plan for the next several years. If you are not planning for a big expansion of your business within the next few years (including the hiring of employees), you will be able to simply get a shared or flexi-desk at a co-working space. These places are also a minimum facility requirement to get a business license in the UAE.
If you are planning on meeting with clients regularly and do plan on hiring employees, you should opt for an office in a separate physical location. You should take into account both the location, infrastructure within a Free Zone and the availability of chosen facilities as it not in all Free Zones such specific facilities as warehouses or retails shops are available.
Also, remember that a company registered within the Free Zone is only allowed to have a facility within a UAE Free Zone where it is registered.
STEP 3: Figure out how many UAE Residence Visas your company will need
Your company in the UAE will need Residence Visas for each employee. The quota for visas depends on the facility type. A shared desk only provides a limited number of visas and this differ from one Free Zone to another. You can usually get two or three visas with a shared desk in Dubai, while if you have your business in Northern Emirates, you are eligible for more.
There are also space requirements for visas: in regards to a physical office, you receive one visa quota for every 9-10 square meters.
STEP 4: Decide on whether you need to be close to sea ports or airports
You will need to consider whether your business in the UAE needs to be close to a sea port or an airport. You want to have the most strategic transportation routes and hubs so that your expenses can be as low as possible. This is especially important if you are going to set up a trading company in the UAE. To give one example, if you were to choose the JAFZA Free Zone for your trading, logistic, or manufacturing company, you would be located in the Jebel Ali port. There are many warehouse facilities here, as well as logistics and brokerage companies, so you will be close to what you need for a trading company. Remember to also do some competitor analysis to see who the competing businesses are in your chosen area.
DMCC Free Zone is a prestigious location given its developed infrastructure. This Free Zone would be the ideal choice if you want a luxury office in one of the many impressive skyscrapers which can accommodate employees, customers, and meetings. In the DMCC you can both rent and purchase offices. This differs from most Free Zones where the offices belong to the Free Zone authority itself and can only be rented.
STEP 5: Find out if a share capital amount is required
One of the common requirements when registering a company in UAE is to deposit a share capital amount. This needs to be deposited either into your company account or the UAE Free Zone authority account. You will also need to provide proof of the deposit to the Free Zone. This means you will have to know in advance what the required minimum share capital is in a particular Free Zone for your specific business activity.
There are two options of share capital:
Authorized – You do not need to deposit share capital
Paid-up – You need to deposit share capital and provide proof of deposit
The minimum share capital amount differs in each Free Zone. You will need to look into the specific UAE Free Zone you are interested in setting up your company and find out what the minimum share capital amount would be for you.
STEP 6: Find out whether there are any restrictions on shareholders
There are restrictions for certain nationalities of shareholders in Free Zones. A nice feature of setting up a company in Dubai Emirate is that you can have high-risk nationalities involved as shareholders in your company.
STEP 7: Find out whether an annual audit report is required
There are some UAE Free Zones which require submitting financial statements such as an annual audit report whereas others do not. In the DMCC Free Zone, it is a requirement to submit an annual audit report at the end of the financial year or as specified by the MOA. Also, the report has to be submitted through one of the UAE auditors from the DMCC Approved Auditors List. If you do not submit the report by the deadline, you will incur penalties.
You will be eligible for certain benefits when you routinely submit financial statements. These benefits include being able to apply to business loans at local banks, attracting new investors, and finding out about the financial health of a business.
STEP 8: Find out the reputation of a Free Zone with local banks
This is a very important task to complete prior to establishing a company in a particular UAE Free Zone. Using the internet or asking a friend will not yield the best answer. This is why you should get a consultation from the corporate service providers and experts. They should be in the field of setting up a business in the UAE and assisting in opening up corporate accounts in the best UAE banks. Do this before registering your business so that you ensure you can open up a corporate bank account for your company.
STEP 9: If you are a UAE resident, find out the NOC requirements
A NOC is essentially a letter from your current employer who is sponsoring your visa. It states your company has no objections to you opening a business in a particular Free Zone. You need to carefully consider this because, for example, in the case of the SAIF zone, it is mandatory for a UAE resident to provide the NOC from their current sponsor. In a Free Zone such as the DMCC, there is no such requirement. In Dubai south Free Zone, for instance, it is required to provide NOC from your employer if you are employed in a governmental organization or under spouse visa.
STEP 10: Create a budget for your annual operating costs
Find out what the applicable fees for registration, licenses, an establishment card, and rental fees will be for the first and second years of operating a business. You will also need to estimate your visa fees, including visas for shareholders and employees planning to be hired within the first year. This will ensure your company is set up and renewed annually properly.
Taking this on alone will be really daunting, which is why My Business Consulting DMCC can help you just as we helped thousands of entrepreneurs by sharing our 10 years’ experience and crafting hyper-personalized solutions for their businesses.
To get all the information in a fast and professional way, reach us out for a free expert advice: [email protected] or contact the Author of the article, Business Setup Expert Svetlana Kursheva directly via WhatsApp +971 55 1479 576