Pros and Cons of a Free Zone Company in UAE

UAE , the land of flourishing businesses and trade ties has a multitude of free trade zones facilitating the smooth flow of foreign investment to the region. These are special economic zones set up for the expatriate investors. These free zones provide tax-free and customs duty-free benefits to the foreign investors. This has become a significant factor for investors to flock to the UAE.

The free zones in UAE are located in Dubai, Sharjah, Abu Dhabi, Ajman, Fujairah, Um Al Qwain and Ras Al Khaimah. These free zones come under the categories of mainland, airport and sea port free zones. Each free zone is specifically created for various operations like industrial, healthcare, finance, media, research, maritime, logistics and IT services for investors looking to start up a business in UAE.

Each free zone works independently and strictly adheres to certain set of rules and regulations pertaining to that free zone. The rules usually differ according to the type of industry or business. Inside each free zone, there can be one or more business or industry segments operating within and only those that come under the specifications of these industries can work in that particular free zone. The free zones in UAE are governed by the Free Zone Authority (FZA).

Free zones are an oasis for foreign investors in UAE but it does have its advantages and disadvantages.

Let us make a quick look at the pros and cons of free zones in UAE.

They have the advantages like:

  • 100% foreign ownership of the establishment:

    This is a winning proposition for expats looking to set up businesses in the UAE. While an investor gets only 49% stake from a limited liability company, there is no such restriction for a business in a free zone in UAE. Expat investors are given 100% ownership of their enterprises functioning inside a free zone.

  • Tax exemption:

    The businesses established in a free zone are completely exempted from export/import taxes and corporate tax for about 50 years.

  • State of the art infrastructure:

    Free zones have a competent infrastructure and provide a constructive business platform for various businesses to grow and excel in their respective verticals.

  • Support services:

    The free zones assist foreign entrepreneurs in labor recruitment and other services like sponsorship and accommodation.

On the downside:

  • Limited activities:

    The businesses in a particular free zone are not entitled to expand beyond their free zone limit to other areas of UAE. If you wish to do so, the business owners have to re-register their company as a private business.

  • Limited freedom to choose a business:

    Only those business segments meant to work in a specific free zone are allowed to work in that zone.

Beyond these minor points, foreign businesses thrive in the UAE region and more investors flock to the region for new business opportunities.

If you are looking to initiate a business in a free zone in the UAE, a registered company formation agency can help iron out the formalities of setting up an enterprise without any of the associated complications.

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