Choosing between Dubai and Abu Dhabi Free Zones is a crucial decision. Let us guide you in discovering the ideal setup for your unique business needs. Contact us today to explore your options and embark on a successful business journey in the UAE.

In the UAE free zones, among the various corporate forms available, three prominent options for foreign company establishment are:
1. Limited Liability Company (LLC)
2. Branch
3. Representative Office

In UAE free zones, local corporations typically adopt a structure similar to a Limited Liability Company (LLC), but the name varies by the specific free zone, such as LLC-FZ, FZCO, FZE, DMCC, and others. Large companies often opt for regional headquarters, but they can also choose branches or representative offices, depending on their business goals.

What is a Freezone?

A free zone is a specialized area created by each emirate in the UAE to attract foreign companies. To operate here, you need a license from the Free Zone Authority. There are over 40 free zones in the UAE, with Dubai being a pioneer. Dubai is a prime investment destination, offering access to Asia, Africa, and Europe, making it highly attractive to investors.

Free zones provide attractive advantages for foreign companies considering them as their operational base. Here are some specific benefits of establishing a company in a free zone:

1. Corporate Tax Exemption: no corporate tax or income tax, and this benefit lasts for 50 years, with the option to renew it. However, there’s a catch. Starting from fiscal years after June 2023, you might have to pay corporate tax if your profits exceed a certain amount (375,000 AED). Also, if your company gets orders from the UAE mainland, corporate tax might apply to those earnings.

2. 100% Foreign Ownership: In all free zones, foreign investors can retain full ownership of their company, without the need for a local sponsor or partner.

3. Repatriation of Profits: Companies operating in free zones can typically repatriate their profits and capital without restrictions.

4. Customs and Import Benefits: In free zones, companies enjoy benefits such as no import duties on goods used internally, but when selling to the mainland, a 5% customs duty applies. Manufacturing firms within free zones require licenses from UAE authorities and the Ministry of Economy. Notably, if a company holds a license from any of the six GCC countries (UAE, Saudi Arabia, Oman, Bahrain, Qatar, Kuwait) and adds at least 40% value to products, customs duties on raw materials, semi-finished goods, machinery, and parts are waived, typically covering most items and destination countries within these nations, which can influence product prices.

5. No Currency Restrictions: There are often no restrictions on the use of foreign currencies within free zones, promoting ease of transactions.

6. Infrastructure and Facilities: Free zones provide state-of-the-art infrastructure, office spaces, and modern amenities to support businesses.

7. Business Support: Many free zones offer comprehensive business support services, including legal, administrative, and logistical assistance.

8. Simplified Licensing: Establishing a company in UAE free zones is usually straightforward, with requirements varying based on business activities. Competition among free zones drives the popularity of those offering efficient services, although response times can differ by zone. Mainland UAE has distinct rules.
   1. Including the Wage Protection System (WPS)
   2. Employee quotas, and Emiratization mandates (2% UAE employees for companies with 50 or more employees).
   3. Notably, WPS is specific to non-free zone areas. While most rules are not directly related to free zones, it’s important to adhere to UAE-wide compliance standards when forming a company.

9. Networking Opportunities: Businesses in free zones can benefit from proximity to other companies, fostering collaboration and growth.

10. Access to Global Markets: Free zones are strategically located, offering easy access to regional and global markets.

Freezone in Abu Dhabi

Abu Dhabi, the UAE’s largest emirate, boasts its own set of Free Zones that cater to diverse sectors. These zones are the gateway for foreign investors looking to tap into Abu Dhabi’s vast potential. Incentives and facilities make them an attractive choice for business setup.

Challenges You Might Face in Free Zones

1. Opening a Bank Account: Some people think it’s tricky to open a company bank account in free zones. This belief comes from concerns about financial problems in the past, like money laundering. While the process may seem a bit more complicated compared to regular businesses, especially for startups, it’s doable with the right guidance and following the rules.
2. Different Rules in Different Free Zones: Free zones have their own rules, which can be confusing. These rules cover things like office contracts, audits, the types of businesses allowed, employee limits, and office space requirements. Picking the right free zone should match your business plans and budget.
3. Limited Relocation Options: Unlike regular businesses, moving your office or facilities within a free zone can be tough. Sometimes, you might realize that your current free zone isn’t the best fit for your business. Only a few free zones, like DMCC, allow relocation, and it can take time and effort.
4. Restrictions on Mainland Transactions: Free zone businesses are considered outside the UAE, so they can’t directly import goods to the UAE mainland, sell wholesale to traders, or deal directly with individuals there. These transactions need to involve local companies or agents with import capabilities. Keep this in mind when planning your business activities

Types of Free Zones

In the UAE, there are over 40 free zones, and they fall into four main categories:

1. Airport Type: These are close to major airports, great for trading and aviation businesses. For example, Dubai Airport Free Zone (DAFZA) is next to Dubai International Airport, offering various facilities. They’re good for air import/export but might be smaller and distant from cities. Examples of such freezones are:
   1. Dubai Airport Free Zone (Dubai)
   2. Abu Dhabi Airport Free Zone (Abu Dhabi)
   3. Sharjah Airport International Free Zone (Sharjah)

2. Port Type: Specialized in shipping-related activities like ship repair and manufacturing. Jebel Ali Free Zone is a notable one. They have ample space but are often far from cities. Examples of such freezones are:
   1. Jebel Ali Free Zone (Dubai)
   2. KEZAD (Abu Dhabi)
   3. Hamriyah Free Zone (Sharjah)

3. Industry-Specific Type: These are for specific industries like media, digital, finance, and healthcare. They’re in city canters, promoting collaboration, but come with more regulations. Examples of such freezones are:
   1. Dubai Health Care City (Dubai)
   2. Dubai Internet City (Dubai)
   3. Dubai International Financial Centre (Dubai)

1. 4. All-Round Type: These free zones are versatile, not specializing in any industry. They can include residential and commercial areas, forming communities with various services. Examples of such freezones are:
      1. Dubai Multi Commodities Centre (Dubai)
      2. Abu Dhabi Global Market
      3. International Free Zone Authority (Dubai)
      4. Sharjah Media City – Shams
      5. Ras Al Khaimah Economic Zone – RAKEZ