What is a Free Zone?
A Free Zone located in the United Arab Emirates is a geographical area in which business is conducted without the taxes or restrictions normally applied to foreign businesses. It is an area where goods can be cleared, handled, manufactured or reconfigured, and re-exported without payment of customs duties and import and export taxes- providing vast advantages for trade.
A Free Zone entity can be owned 100% by a foreign individual or Company without the need for Emirati presence (with certain restrictions to this rule, such as if your business is a pharmacy or real estate agency). In this instance, the Dubai Health Authority and Real Estate Regulatory Authority will require the presence of a UAE National (Emirati) Shareholder in order to issue the required approvals, as an example. However, the vast majority of trading and services-based companies can set-up a in a Free Zone across Dubai and the UAE without any restrictions.
The UAE has approximately 50 Free Zones across it’s seven Emirates (Abu Dhabi, Dubai, Sharjah, Fujairah, Ajman, Ras al-Khaimah and Umm al-Quwain)- each able to provide you with a business license and a legal address, and other benefits dependent on the package you choose.
Free Zone’s were designed to encourage foreign investment to the UAE providing an easier start-up process as well as labour and immigration procedures with most importantly, 100% ownership for any nationality. Each Free Zone has its own Authority which governs that particular and thus, comes with its own and Rules & Regulations however, fundamentally all Free Zone’s operate via the same core regulations and values.
As a Company operating in a Free Zone you also have the benefit of 100% repatriation of revenue and profits back to your home Country which is of most importance to foreign investors and business owners in the region.
Is there any corporate/income tax applied to Free Zone Companies or individuals?
There is no corporate/income tax on individuals or companies operating within a Free Zone which applies for 50 years from the date of registration of the Company.
What is a Limited Liability Company?
A Limited Liability Company (LLC) is a corporate structure whereby the company is a separate and distinct legal entity. The primary advantage of an LLC structure is that the liabilities of the company, (whether arising in contract or otherwise) are the company’s liabilities and not the personal liabilities of the Shareholders. Equally, the company’s assets belong to the Company and are not the personal assets of the Shareholders. With a Limited Liability Company, you are: -
• Entitled to obtain a company license
• Entitled to sponsor employee(s)
• Entitled to open a corporate bank account
• Entitled to own assets
What is a Branch Company?
A Branch Company is an entity belonging to an existing parent company. All profits, benefits, assets and other returns of the Branch Company shall be profits, benefits, assets and other returns of the parent company. Equally, all costs, expenses, debts and other liabilities of the branch are costs, expenses, debts and other liabilities of the parent company. A Branch Company is not issued with a Certificate of Incorporation here in the UAE, but a license to be legally able to operate in the UAE. It is simply classes as an extension of its parent.
With a Branch Company you are: -
• Entitled to obtain a company license
• Entitles to sponsor employee(s)
• Entitled to open a corporate bank account
• Entitled to own assets
If your company is a Branch of a foreign entity, you will be required to submit a valid Certificate of Good Standing of the Parent Company in order to incorporate the Branch, as well as on an annual basis in order to renew your license. This original certificate will need to be attested by the UAE Embassy in the Country of origin as well as the Ministry of Foreign Affairs here in the UAE.
Can I perform my business activities outside of my licensed Free Zone?
Companies registered with a Free Zone Authority are permitted to carry out business activities with companies within that Free Zone or overseas, with companies outside the UAE. Should the company wish to conduct business with local UAE based Government entities or local companies within the UAE they should either establish a local branch office or transact through a local commercial agent, licensed by Dubai’s Economic Department.
If you wish to trade physical products within the UAE (known as “Onshore”) you can do so directly via a local distributor- an established LLC company that has an import/export license issued by Dubai’s Economic Department who would be assigned to clear any goods through UAE customs on your behalf.
From a Free Zone, will I be charged customs duty?
It depends on your business operations. A Free Zone is considered to be outside of the customs territory although they are still subject to the customs controls, usual customs procedures do not apply to a Free Zone Company.
Goods may enter a Free Zone without paying customs taxes or ‘duties’, however goods exiting the Free Zone and entering the UAE’s local market shall be treated as foreign goods and shall therefore be subject to customs duty levied as follows: -
General Goods and Commodities 5%
Alcoholic Beverages 50%
Cigarettes, Tobacco & derivatives thereof 100%
When leaving the Free Zone, a customs declaration is required to be issued for the goods, which will also be inspected and examined. The goods can then leave the Free Zone, providing that an original detailed invoice is produced.
Goods located in a Free Zone shall not be subject to any duties for as long as they remain therein.
My goods/finished products leaving the Free Zone are a combination of UAE local market goods and foreign goods. Do I have to pay customs duty on the full invoice value of the goods leaving the Free Zone, even though they are partly made up of UAE local market goods in which customs duty has already been paid?
Yes. Article 85 of the GCC Common Customs Law 2008 states "Goods taken out from the Free Zone into the Customs Office are treated as foreign goods even if incorporating local raw materials or articles on which customs duties and taxes have been collected prior to their admission into the free zone".
How can I move my goods from Free Zone to Free Zone?
A customs ‘transit’ declaration will be issued and a refundable deposit of an amount equivalent to 5% of the total value of the goods is required to be paid. The deposit will then be refunded upon proving the arrival of the goods to another Free Zone through submission of the relevant customs documents approved by the customs office receiving the goods.
Can I sell my goods to another company located within the same Free Zone?
Yes, with no customs duty applicable. However, the arrival of the goods at the other company within the Free Zone must be proven, alongside a document proving the transfer of the goods between the two Free Zone companies.
Under what basis can I use the “made in UAE tag” on my products?
In order to receive the ‘Made in the UAE’ tag from the UAE Ministry of Economics, the product(s) must be manufactured at least 40% to completion in the UAE.
What is a Holding Company?
A Holding Company license allows an entity to hold standalone assets and/or stakes in other companies. You would require a holding company for the purpose of controlling another company or property such as real estate, patents, trademarks, stocks, and other assets.
What is a Social Media Influencer license?
A Social Media Influencer license allows Social Media Influencers to publish promotional content across their Social Media accounts. This kind of license must be issued with an approval (or permit) from the National Media Council, as a requirement of the UAE Government. This license is applicable to individuals and/or companies that use their Social Media accounts as a revenue-generating platform by disseminating information to a wide audience.
How do I obtain a UAE PO BOX Number?
A PO BOX number will be issued in whichever Emirate your company is registered in. There will be a one-time registration fee for the PO BOX alongside an annual fee based on the package you choose. The most cost-effective option involves physical pick-up being required from the designated post-office (the most common package used in the UAE), however there are also packages available which include a weekly delivery service to a location of your choice.
I would rather apply for my visa myself. Is this possible, rather than using the Free Zone Authority I am licensed under?
No, vising immigration directly to process visa applications is only possible for dependant and domestic visa applications.
All services pertaining to your company’s employment visas can only be availed through the Company’s Sponsor. The Free Zone Authority that has licensed your Company is that Sponsor and it is for this reason they will be required to apply for all visas with immigration directly.
How do I get a visa for my Wife and Children?
When sponsoring dependents, you will need to provide the immigration department with 3 months’ personal bank statements which show a minimum monthly salary of AED 4,000, as well as your local UAE IBAN number.
Other requirements of the immigration department will be a recent utility bill copy, so a residential premise must be leased in the UAE for this purpose.
The visa validity of the dependent will follow that of the sponsor.
Up to what age can I apply for a UAE Residence Visa?
Shareholders who are up to 69 years old are also eligible to apply for a visa under their Company. However, all employees, dependents and domestic workers applying for a visa under the company should not be older than 59 years old.
How do I apply for a Tax Residency Certificate?
We can apply for both individual and corporate certificates within 4 working days. You must be a UAE resident holding a valid visa in order to apply for an individual certificate. The Ministry of Finance will not issue Tax Residency Certificates to Offshore Companies and Branches of Foreign Companies.
What is the E-Channel Immigration System?
Effective 1 March 2018, the E-Channel Immigration System is a new and unified immigration system that has already been implemented across the Northern Emirates of the UAE, however this is not applicable in Dubai and Abu Dhabi at present.
This allows businesses and individuals to apply for visas, residence and entry permits through a single online portal, instead of visiting a typing centre or immigration office directly. The system also removes the need for printed documents and aims to ensure that all applications are processed more efficiently with improved integration across the Emirates. In line with this latest update from the General Directorate of Residency and Foreign Affairs, all companies licensed outside of Dubai are mandated to register in the E-Channel platform with immediate effect to allow them to continue with current and future visa or immigration file applications.
The registration fee is AED 2,200 and the annual renewal charges will be AED 1,200.
There is also a refundable deposit required of AED 5,000 which will be refunded upon closure of a Company.