If you are considering establishing a business in the UAE, you would be wise to spend time investigating the various idiosyncrasies of the local market. One of the first decisions you will arrive at is where to base your business; on the UAE’s mainland, or in one of its numerous freezones. Both have very different business environments and regulations that must be adhered to. Here are some useful points to consider about what setting up shop in a freezone means:
- Freezones are based largely in Dubai but there are also a number in the northern emirates like Fujairah and Ras Al Khaimah.
- A further distinction to make is between a free zone company and an offshore company. A UAE offshore company will allow for tax invoicing in the UAE to take advantage of the zero tax take without the need for minimum capital or an actual office facility. Companies will, however, need to keep financial records and to issue and annual financial report auditing by a company approved by the free zone the company is established in. Annual general meetings must also be held.
- Free zone companies, on the other hand, can have local bank accounts, have lower renewal charges and can maintain privacy. Unlike mainland companies, freezone companies can be owned and formed entirely by one person. As we saw last week, mainland companies in the UAE must be formed with an Emirati partner who will own 51% or more of the company.
- However, some companies are exempt from this caveat if the activities of their business relate to the oil industry, production of electricity and gas, or the treatment or distribution of water.
- Freezone companies can repatriate 100 per cent of their capital and profits. They are exempt from paying corporate tax in the UAE for a minimum of 50 years.
- Independent Free Zone Authorities govern the rules of each individual zone and are responsible for issuing operating licences as well as helping companies to establish themselves.