What is a Free Zone?
A company in a free zone, we will call it a Free Zone company, is a type of company that is registered in one of the more than 50 Free Zones in Dubai.
The characteristics of these companies are that they are regulated by the authorities of the respective zones, that they have some tax advantages and that they can carry out business locally (within the zone) and internationally.
Some of the best-known free zones in Dubai for starting a business are:
- Dubai Multi Commodities Center (DMCC)
- Dubai South Free Zone (DWC)
- International Free Zone Authority of Dubai (IFZA)
- Dubai International Financial Center (DIFC)
- Jebel Ali (JAFZA)
Other features or advantages that you should know about this type of company are:
- They melt very quickly (possibly even in 4 days)
- It is tax free
- No income tax if you live in the UAE
- No accounting obligation (partly)
- Without annual accounts
- Possibility of a foreigner owning 100% of the property
However, you should keep in mind that there are some limitations with Free Zone companies. The most notable is that the company’s office can only be located in the same zone in which the company is registered.
Additionally, each Free Trade Zone has regulations (applicable only to that zone) and is focused on a type of industry or business, so you’ll need to know the specifics of the one you’re interested in and choose accordingly.
Step 1: Mainland or Continental Territory
On the other hand, there are Mainland companies. As the name suggests, they are located on the mainland, rather than in a Free Zone. This company is more suitable for people who want to offer services or products to clients in Dubai, rather than abroad.
The biggest advantage of this type of company is that they can operate throughout the UAE and are not restricted to its Free Trade Zone. Therefore, they are more attractive to companies that need to have facilities such as factories or supply goods or services to the UAE market.
Other interesting advantages of this company are:
- Its shareholders can be individuals or foreign companies.
- They have access to a broader market and customer base
The most important features you should keep in mind about the mainland are:
- It is easier to cooperate with local banks
- You can form a limited liability company or a sole proprietorship.
- Must have a CEO (shareholders are optional)
- The license costs between €3,000 and €4,000
- The visa is unlimited
- No income tax if you live in the UAE
- 9% corporate tax (from June 2023)
Regarding the requirements for this type of company, it must have a locally authorized director or officer. You should also keep in mind that tax rates are generally higher than for Free Zone companies.
Step 2: Choose a business activity
Once you have thoroughly studied the types of companies and chosen the one that best suits you, it’s time to choose the business activity you want to develop.
You’ll also need to take this into account when choosing the type of company, as there are free trade zones with restrictions on the types of activities allowed.
Step 3: Reserve the company name
With the previous two decisions already made, it’s time to check the availability of the name you want to use for your company. It’s important that the name is unique and not already used by another Dubai company.
Additionally, it is also recommended that the name can be written in both Arabic and English and that it not be offensive to Emirati culture (religion, traditions, etc.).
Once the checks are complete, you must reserve the name with the Dubai Department of Economic Development (DED).
Step 4: Obtain a business license
Once you receive approval for the name you have reserved, you can apply for the business license corresponding to the commercial activities you intend to carry out.
The usual thing to do at this step is to pay the corresponding fees for issuing the license.
Step 5: Register your tax address
Once you have applied for the license, you must obtain the physical space, offices, headquarters… (the premises necessary for your activity) and register your registered office there.
In Dubai, you can choose from many types of offices that are eligible for this registration, such as private offices, coworking spaces, and serviced offices. Obviously, everything will depend on the type of business you run and the services you offer.
Step 6: Register the company
The next step is to finally register your business. To do so, you must complete the registration forms and submit the necessary documents to the Dubai Department of Economic Development (DED).
Some of the documents you must submit for registration are:
- Company bylaws
- Lease
- Commercial license
- Other documents depending on the legal form of the company
Step 7: Open a corporate bank account
Finally, you need to open a corporate bank account, i.e. in the name of your company, in a bank in Dubai.
This step is necessary to conduct business transactions and meet your company’s financial requirements.
Optional Step: Obtain Permits and Authorizations
Please note that depending on the business activity you intend to carry out and your location, you may need to obtain additional permits and authorizations from various authorities.
Examples of such authorities include Dubai Municipality, the Department of Tourism and Commerce Marketing (DTCM), and the Department of Urban Planning and Development, among others.
Questions about opening a business in Dubai
Surely, after reading the different steps, you still have some questions. Don’t worry, we’ll go over the most common ones and answer them.
How long does it take to set up a business in Dubai?
The process of opening a business in Dubai is much faster than in other countries. It generally takes four days if you apply through the Dubai Department of Economic Development.
Plus, if you use the Basher online platform, it can be done in 15 minutes.
How much does it cost to start a business in Dubai?
The total cost of setting up your company in Dubai will depend on many factors, such as whether it’s in a free zone or not, which free zone you choose, whether you’re doing it with or without a visa, etc.
To give you an idea, the initial investment starts at €3,000 in Mainland companies and €6,000 in Free Zone companies.
What taxes are paid in Dubai?
On the one hand, there are companies. Since June 2023, they have been subject to Corporate Tax, for which they pay 9% of corporate profits exceeding AED 375,000 (about €93,000). Up to that amount, they pay 0% tax.
Then there are personal taxes. This is where things get interesting. For example, VAT is 0% (it only goes up to 5% on certain products), there’s no inheritance tax, no gift tax, no wealth tax, and no real estate tax. And corporate dividends are taxed at 0%.
Not bad, huh? On this topic and other aspects, you should consider, tax residency and its advantages.
And with that, we’ve covered all the information on how to open a business in Dubai. If there’s anything unclear or you need help, please contact us and we’ll discuss your case.