Points to remember before setting up a business in UAE Free Zone

With the growing need and to attract the foreign investment in United Arab Emirates government has created free zones which are also called as special economic zones. Each of the seven emirates of the United Arab Emirates has developed these zones. Free zones operate under the free zone authority developed by the government of each emirate and these zones played vital role in the economy of that emirate and the country as whole.

These free zones have reserved for business activities, some of the free zones are only reserved for a specific type of business activity.

Among other, Dubai free zone is the most famous and anyone with a dream of free zone company formation in Dubai can easily fulfill.

Setup your business

Almost all type of business activities are allowed in free zone but you must get a license before setting up a business in UAE free zone.

Every emirate in United Arab Emirate has free zones or special economic zone but before you choose one to for setting up your business you must remember that once you setup your business in a free zone you may not be able to do business outside of that economic zone under that license and company name.

  • You may be able to continue international business though;
  • you can trade with the outside world.

Every zone allowed number of business activities and you can only undertake the activities that are listed on the license you are issued. Some Industrial activities need special permission from environment agency that you must obtain before beginning your operations.

Free zones have been assigned a special legal status and companies and businesses in free zone are treated as foreign companies or business or companies functioning outside of United Arab Emirates. The reason to choose United Arab Emirates Free zone is since free zone companies are treated as companies working outside of the country and expat interested in using UAE free zone as regional manufacturing or distributing area as most of the items produced here are subjected to be exported without any tax and duties being imposed.

Free zone is the only option for businesses and companies’ expat to claim the full 100% ownership of their business. If you are setting up business or company outside of free zone you need to involve a local sponsor who will by law own 51% of the business, in contrast to this free zone companies are fully own by investors.

Business in UAE Free Zone

Setting Up a business in United Arab Emirates free zone does not require a local sponsor like you would require in mainland business setup, instead free zone acts as your sponsor and does not hold any part of your company or business.

Free zone acts as a local sponsor; also free zone is the licensing authority so you would need to apply to the free zone for new business setup license or for renewal or cancellation of any license.

There are number of licensing options available when it comes to a free zone company, there are some license types under which you are allowed to undertake multiple activities, you can add additional activities under one license with no additional charges if that activity falls under the available list of allowed activities.

There are some free zones which are specific to only one category of business license such as:

  • Dubai Internet city,
  • Dubai Media city.

Dubai Internet City only has companies involve in the business of Information technology.

Dubai Media city only has companies involve in the business of Media and news groups.


Free zones are special economic zones and offer number of benefits to attract the foreign investment, one the main benefit is tax optimization.

  1. There are number of tax optimization options available in free zone, there is 0% tax on income and profit gains. 0% corporate and personal income tax.
  2. When setting up a mainland company or offshore company it may take a while however a free zone company setup is fast, licensing process is easy and in some free zones it can be issued as soon as in two days.
  3. Free zone business setups help recruiting skilled work force.
  4. Getting visas for employees and managers is easy and hassle free.
  5. Free zones offer easy, cost effective and long term lease on offices, warehouse and industrial storage units.
  6. Many free zones provide cost effective living facilities with the availability of school, parks and shopping malls.
  7. There are free zones which are adjacent to airports and sea ports which gives them a unique edge when you are doing international trade.
  8. Free zone offers different types of business setup options such as trading companies, limited liability companies and Branch offices, free zone enterprise.
  9. Free zone allow different types of licensing option to choose from, such as Industrial license, commercial license and service license.

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