The United Arab Emirates has around 40 separate territories with special conditions for investors and entrepreneurs from abroad. Such territories are called free zones, and this name reflects arguably the most sought-after feature they provide: numerous tax exemptions. But these zones have much more advantages than just a special tax regime. Read on to get all the necessary information about how to find and use the cheapest free zone a company in the UAE can find.
How free zones work
A free zone is a specific economic area established by the UAE government. All of these areas share a particular tax, export, and import regime. There are currently 46 free zones, and the majority of them are basically focused on a particular industry or sector and offer registration under special conditions only to relevant enterprises. Each of these territories has its own Free Zone Authority (usually called FZA) that issues licenses and governs all the operations in its respective field.
Main perks and benefits
All entities registered in one of these established special territories enjoy the following tax benefits:
- Total foreign ownership of all assets
- Freedom from import and export tax
- Funds and profits can be sent abroad
- Up to 50 years without corporate tax
However, this list is not restrictive. Businesses licensed to operate in such a zone also receive special help with recruitment, housing, and so on. Moreover, these areas are not just tax havens that can aim to attract foreign investors only with interesting financial conditions. They are also heavily-developed industrial areas with advanced infrastructure, so they can save your business much effort and money.
100% foreign ownership
Until recently, ownership for entities from abroad was arguably the best quality of such zones because of the general restrictions for ownership established for onshore companies. Simply put, you couldn’t open a commercial company in the country without a major Emirati shareholder or agent, and this rule was ineffective only in free zones. However, this restriction was finally lifted in 2021, and now foreigners can run commercial enterprises in the UAE without intermediaries and with full ownership, even if they receive their license outside of a designated business park. While that means free areas are no longer unique in this relation, they still provide the same opportunity for full ownership along with many other benefits.
No corporate or income tax
Today, the majority of companies that want to open a branch in one of the UAE’s special zones seem to be drawn by zero corporate and personal taxes in these tax havens. They help you avoid paying income tax, and your firm can be completely exempted from corporate tax for a period of up to 50 years. That allows you to raise your profits in the long term and save a lot of effort. However, the UAE law states that only qualifying income can be taxed at 0%, and if you fail to comply with certain requirements, all your non-qualifying income will be taxed at 9%. Moreover, the income threshold of 375,000 AED might not be actually applicable for all entities residing in a special zone. That means you should consult with the authorities during the licensing process if you have any doubts.
Easy setup
Opening a firm in a special area is relatively simple. The process in general looks like this:
- Choose the type of legal entity — there are usually two possible options: FZ LLC (or FZ Co.) and Free Zone Establishment (FZE), and the main differences between them are the number and legal status of shareholders; not every area allows you to open both of them, so you need to check with the FZA that’s going to process your license application. Foreign firms can also open separate branches in the country’s special districts.
- Choose a trade name — each tax-free area sets its own rules for trade names, so you should check with the respective FZA about the restricted trade names. For example, you can’t open a FZ LLC that includes ‘United Arab Emirates’ in its name. It prevents possible confusion with official institutions. The majority of zones also prohibit any immoral, religion-related, or already used names, too.
- Apply for a business license — the type of your permit should match the main activity of your company. Most areas offer numerous possible activities. Request a full activities list from your respective FZA.
- Find a future office — it does not matter whether you buy or lease an office space. However, it must comply with the requirements set by your permit.
- Finish the registration procedure and get all the papers — that’s it, now just get pre-approved, register your company, and receive the permit. The full list of documents you need to apply is available at your territorial FZA.
However, you should know that there might be additional demands made by certain FZAs. That includes minimum capital requirements that vary between areas, so make sure to learn about such limitations beforehand.
Import and export duties exemption
Entities approved by FZAs are exempted from paying import and export duties and allowed to ignore any additional restrictions for transactions in different currencies. That makes FZs a great opportunity for international firms that operate in many different countries.
Governmental support
Free zones are not mere tax havens: they are designed to become hubs of teamwork and innovation, and the UAE government spends much money and effort to attract foreign companies here and make their processes as convenient as possible. That includes a broad range of services — from providing an extremely high-quality infrastructure including modern office spaces and public transport to legislative and administrative support during all steps of the registration process and even after you’ve been all set up.
Top 10 cost-effective free zones
While most of the specialized industrial and commercial areas in the UAE are specifically designed to be as cheap and effective as possible, some of them are definitely more attractive and cost-effective than others. Let’s review the top 10 territories where you can get the cheapest free zone license in the UAE.
Sharjah Research Technology and Innovation Park (SRTIP)
Founded in 2016, SRTIP has managed to become one of the leading scientific hubs promoting lots of hot research areas, including many different directions of ecological science, design, architecture, and also ecology-friendly transport. It is an entire innovative ecosystem that integrates many thousands of scientists, engineers, and businessmen from all over the world. The cheapest Scientist package costs 9,000 AED, and a permit for a hi-tech office can be purchased for 15,000 AED.
Sharjah Media City (SHAMS)
Launched in 2017, Sharjah Media City is designed to accommodate a variety of creative businesses, especially media-related ones. Licenses for companies cost from 11,500 AED, and you can apply for your permit from home: there’s no need to visit the country to do it. The authorities usually process all your documents in just 2 days and provide help with recruitment and other problems, and the entire procedure takes about a week. This is one of the most advanced free zones in the UAE, and it has a lot of valuable opportunities for businesses operating in various digital markets.
Raz Al Khaimah (RAKEZ)
Raz Al Khaimah Economic Zone is yet another well-known and densely populated tax-free territory: in 2020, it had more than 14,000 officially registered companies. Its focus on digital businesses allowed the area to grow by 20% during the COVID-19 pandemic. RAKEZ features packages starting from just 8,300 AED, and investors can choose among a wide variety of activities, including service, industry, and education. The zone also has a great selection of warehouses and industrial-purpose land plots for development. In general, it is one of the most innovative and thriving economic hubs in the Middle East that greatly benefits from its proximity to RAK Airport, the fourth largest national airport.
Ajman Free Zone (AFZ)
Established in 1988, this special tax area is one of the oldest in the country. It is known to provide lots of various facilities from flexible single office spaces to warehouses intended for large companies. The costs of licenses in AFZ start from just 11,900 AED per year, and you need to renew your permit annually. All businesses in AFZ are charged with an additional 5% VAT, but you do not have to pay it for transactions between zones. About 40% of firms in AFZ are Indian.
Ajman Media City (AMC)
Ajman Media City was launched in 2018 as an independent tax-free territory in Ajman that is focused primarily on media-related business. It allows foreign companies to receive e-commerce licenses, and a commercial license here costs just 8,500 AED. Receiving a license here is extremely easy: usually it takes just about a day, and you can apply online even without visiting the country. It’s perfect for small companies since there are no requirements for independent audit here. You can choose from several types of permits, including a Freelancer package that costs just 6,000 AED.
Fujairah Creative City (FCC)
Fujairah Creative City is another special economic area in the UAE that focuses on media, education, marketing, and entertainment. It has no capital threshold and no audit requirements. It’s currently one of the most popular FZs of its kind, and that is not surprising: the hub is just one and a half hour drive from Dubai, but the local requirements for business owners are notably less strict here than in the city, and it also makes this territory relatively inexpensive. You can receive 15 visas under one permit, and the costs for each application start from 11,000 AED.
DUQE Free Zone
DUQE is a unique zone located onboard a real sea vehicle that is moored just about 20 minutes from Dubai International Airport and 15 minutes from Burj Khalifa. DUQE has several flexible packages for any company type, and a license starts from 12,500 AED here. It offers a really impressive choice of facilities and workspaces as well as a wide range of additional services like banking services and legal consulting. It’s widely known to provide excellent networking opportunities, too: it already has a lively community of like-minded businessmen and investors. However, it’s still arguably the cheapest free zone in Dubai that provides such all-in-one features.
Hamriyah Free Zone
Opened in 1995, this area is a large one. It features all kinds of facilities, including hi-tech offices and customizable plots of industrial land. The area is especially popular with a variety of food industry players: the Food Park accommodates all kinds of businesses that participate in food processing, exporting, and repacking. The license fee starts from 11,000 AED here, and there is also a minimum capital threshold: you need a share capital of at least 150,000 AED to create a FZE in this area.
Sharjah Airport International
SAIFZ is an important industrial hub with world-class infrastructure with different grades of offices and warehouses. You can either buy or lease them, but the payments are made annually. SAIFZ provides help with recruitment and other business-related issues at competitive prices. The most basic cost of a permit starts from 5,750 AED, but you might be charged with additional fees and costs.
Dubai Internet City (DIC)
DIC is currently known as the largest IT hub in the Middle East that features a really impressive range of commercial spaces and facilities. Founded in 2000, it’s a thriving hi-tech business park now that hosts more than 1,400 companies, including such world-famous brands as Facebook, Microsoft, IBM, Dell, Samsung, Google, Intel, and many others. Moreover, DIC is tightly connected to other business parks like Dubai Media City. The entry fee starts from 15,000 AED here.
Cheapest free zone in Dubai
While the most affordable low-tax areas are located outside of Dubai, there are several areas right in the city which might nonetheless be used to purchase the cheapest free zone license in Dubai.
Dubai International Financial Center
Founded back in 2004, DIFC is a special economic zone supervised by a special regulator, DFSA. It’s an area focused on trading and financial technology that is listed among the top 10 onshore financial centers globally. The application fee for a Category 4 permit starts from 15,000 USD here.
International Free Zone Authority
IFZA is one of the most affordable low-tax territories in the city. Its most basic packages start from just 11,500 AED, making the area one of the cheapest tax-free options for opening a business here. There are limitations on potential activities in IFZA, however: only consulting, trading, and service is allowed.
Dubai Silicon Oasis
Established in 2003, Dubai Silicon Oasis is a tax-free zone that’s focused on attracting hi-tech startup projects from all over the globe. It hosts about 1,000 startups from 70 countries right now. While DSO is known for its advanced infrastructure and many additional services for entrepreneurs, permits are rather inexpensive here: the basic cost is somewhere around 12,000 AED, and the overall setup costs about 30,000 AED. DSO features offices of varying grades and small-scale industrial units.
Jebel Ali Free Zone (Jafza)
Located at the western side of the city, Jafza is a pretty old zone that hosts almost 9,000 international companies, including about 100 brands from Global 500. Jafza gives about one-fifth of Dubai’s GDP annually, but it’s pretty cheap when it comes to registration costs. You will have to pay 10,000 AED for registration and 5,500 AED or 9,000 AED depending on your license’s type. The total cost for a small firm amounts to 90,000 AED here.
Dubai Healthcare City
Dubai Healthcare City is an economic area that hosts healthcare facilities. The UAE leaders claim that the main goal of its creation was to provide high-quality healthcare services and attract lots of tourists to Dubai who search for world-class medical treatments. The commercial license fee starts from about 15,000 AED here, and the overall setup cost might reach 22,000 AED on average. That makes DHC a great option for investors who want to register as the cheapest free zone company in the UAE.
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