Finding the right UAE free zone

With a large variety of the UAE’s free zones each offering something different, it’s important to calculate all of the upfront costs before making a decision.

The UAE is home to more than 30 free zones, with a large number of those located within Dubai.

There are countless reasons why setting up in a free zone is an attractive option for business, entrepreneurs and foreign investors –

• It means you have 100 percent foreign ownership of the business.
• You are also entitled to 100 percent import and full repatriation of capital and profits.
• You are exempt from corporate and personal taxes.
• You can tap into a network or business community in which a free zone authority can help you with support services, sponsorship or even housing.

The costs of setting up in these areas can greatly vary according to the location and industry.

Free zones by sector

For retailers, logistics and trading companies, the most cost-effective options can be found in Fujairah, Sharjah and Ras Al Khaimah, while key zones such as Jebel Ali Free Zone (JAFZA) can prove to be much costlier.

Those in service industries are usually established within the free zones that govern their sectors (Dubai Media City, DMCC, Dubai Healthcare City, etc), which have set-up costs that are often more affordable.

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Documents and licenses

The first step of this process entails submitting an application along with all required documents (passport copy, project summary, legal documents, trade name, etc). Once approvals are in, the next step is to select licenses and products needed.

Options include a Free Zone Establishment License (FZE), a Free Zone Company or a branch office of an existing company.

The FZE title and Free Zone Company licenses are typically more affordable and can range anywhere from AED 2,500 to AED 9,000, depending on the number of shareholders involved.

Meanwhile, a business with a wider scope of products and services may opt for a General Trading License, which can cost as much as AED 30,000. Do keep in mind that all license fees are usually separate from registration fees, which also can vary depending on the nature of the free zone.

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Set-up time and costs

It can take anywhere from one to two months to incorporate a business within a free zone. The key to speeding up this process is the ability of the business owner/ investor to provide all documentation and payments. Outside of these one-off set up charges are other fees, which include those related to residency and sponsorship (AED 1,000 – 3,000 per visa) and, of course, annual rent.

As with the case with all rental markets, the value varies greatly depending on the location and type of space occupied (flexi-space, office space, showroom or land plots). For example, the annual cost of renting an office unit within Fujairah Free Zone is AED 20,000, compared to nearly AED 47,000 for a similar unit in JAFZA.

The good news is that a majority of the costs are only charged for the first year. Trade licenses and residency visas last for three years, and it’s usually only rent and utilities that have to be paid during subsequent years.

Overall, the costs taken on within the first year by a free zone business are higher than their onshore counterparts in the UAE. The area of company formation and free zone authorities is fast changing, and there are often regulatory changes and developments that all businesses should be aware of.

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Free zone costs compared

The official websites of the various free zones offer a wealth of information, as well as many e-services that aim to make the process more convenient and efficient. However, considering the complexities involved, it would be wise to seek the advise of legal advisors or company formation specialists.