6 Reasons to Start A Business in a Free Zone in Dubai
There are some 45 free zones in the United Arab Emirates, out of which 30 of them are in Dubai. There is a dedicated free zone for just about every business activity. For example, the Dubai International Financial Centre, which is a free zone, is home to the NASDAQ Dubai stock exchange. This makes it attractive to companies that operate in the financial services sector to be located here. Large companies are also located in free zones – Microsoft has its office at the Dubai Internet City, which is another free zone.
1. Scale Up or Down According to your Operational Needs
One of the biggest advantages of operating out of a free zone in Dubai is that you can change your office without changing your address. Your address at the free zone is a PO Box, which it untied to your physical location. So when you grow, you can move into a larger office and still retain your mailing and correspondence address. Or if you feel the need to scale back some of your operations, you can move into a smaller office – and pay only for what you use. There are a lot of options to be had at a free zone.
If you need a warehouse, there is always one to be had in a free zone. There are warehouses of varying sizes that you could choose from. If your business does so well that you need a bigger warehouse, you can easily move into one at the free zone, without the hassle of hunting for one. You could shift your office to beside your warehouse, so that you are located closer to your operations – all without changing your address. You can even move into a smaller warehouse if and when you outsource some of your operations.
2. Exemption from Labour Restrictions
A company located on the mainland – this is the part of the United Arab Emirates that is not part of a free zone – has to have 100 square feet of office / commercial space for every employee. This can sometimes upset hiring plans if your office does not have the necessary space and you are in dire need of staff for your operations. Companies located in free zones are exempt from this requirement. So you can hire as many staff as you want, irrespective of the size of your office at the free zone.
Companies located on mainland also have to see to it that 10% of their workforce comprises of Emiratis, which is the term used to refer to citizens of the United Arab Emirates. This rule, known as Emiratization, came into effect in September 2021, and companies in the private sector have five years to comply. For the first year, they have to see to it that 2% of their skilled workforce comprises of Emiratis. Companies located in free zones are exempt from this Labour Law requirement, and they can hire the staff of their choice.
3. No Annual Audit Requirements
Companies located on the mainland are required to have their accounts audited every year. However, companies located in free zones are required to have their accounts audited only once every five years or so. Given that an audit exercise can cost anything from AED 1000 for a single-person, single-owner company to AED 25,000 for a small to medium-sized company, this represents a significant cost savings in administrative fees (even more for large companies). A penny saved is as good as a penny earned.
4. Exemption from Taxes
Companies located in free zones are exempted from the 9% Corporate Tax that is applicable to companies on the mainland, which is all set to come into effect from 1st June 2023. Companies located in free zones are further exempt from the 5% Value Added Tax that is applicable to companies located on the mainland in Dubai, provided they do business with another company in the same free zone or another free zone. Value Added Tax is also not applicable if the volume of your business does not exceed AED 375,000
There are also no short-term or long-term capital gains taxes in the United Arab Emirates, nor is there any tax on personal income.
5. Exemption from Import and Export Duties
Companies located in free zones are exempt from all import and export duties. That means you could import goods for sale in the United Arab Emirates without having any import duties whatsoever. There are also no import duties applicable if you import equipment and machinery for your own operations, while being located in a free zone. For those running industrial operations, this can be a major advantage to have. There are also no export duties levied when you ship your goods / services overseas.
6. Freedom to Repatriate your Capital and Profits
There is no law which requires you to lock in your investment for any given period of time. You can repatriate 100% of your capital at any time, and this is applicable to the profits earned as well. Dubai is a world-class city that is at par with the likes of New York, London, and Singapore. It has aligned itself with international banking operations. The UAE Dirham is pegged to the US Dollar, lending itself to a very favorable business climate. You can transact business in USD, GBP, EUR, or any other major currency