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What are free zones in the UAE, and how do they differ from each other

Что такое фризоны в ОАЭ, и чем они отличаются друг от друга

Free economic zones (FEZ or free zone) – special geographically limited territories, within which the most favorable conditions for registration and business are created. FEZ can be defined as a business community, the purpose of which is to actively attract foreign capital. For foreign entrepreneurs, the simplest scheme for opening an enterprise operates here. They have the right to enjoy tax and customs privileges, can become 100% owners of the company and do not involve a local agent for registration.

Commercial activities within the zone are not subject to national structures: management and control are carried out by internal bodies with very broad powers.

Today, there are more than 40 free economic zones in the country, most of which are concentrated in Dubai, the scientific, economic and cultural center of the principality. Despite a number of similarities, the zones differ greatly from each other in many ways. Vladimir Sviridov– the CEO of our company, identifies several points where the differences are most significant.

Specialization

Free zones in the UAE

This is the first thing to pay attention to when choosing a suitable free zone. After all, each has a clearly limited list of types of permitted activities. This technique made it possible to concentrate on a limited area all the tools and services necessary for the development of a certain industrial or commercial area. For example, if Dubai Golden and Diamond Park specializes in the processing of precious stones and the production of jewelry, it does not need huge warehouses, but there will be increased requirements for safety and security. Dubai Silicon Oasis (DSO) is focused on high technology, electronics, engineering. For the successful development of this economic sector, it is necessary to concentrate the most advanced technical equipment, communication tools, scientific, industrial and experimental facilities in one place.

There are several zones with a wide range of business opportunities. For example, Dubai Internet City is developing all areas related to information technology. Here you can register a business in the field of:

  • e-commerce;
  • telecommunications;
  • media and marketing services;
  • gaming and esports;
  • Internet and multimedia;
  • ads;
  • software development.

Regulatory framework

The Frison is a free territory only with regard to economic activity. It is regulated by the internal regulatory framework. For example, DIFC has an open register of beneficiaries, its own arbitration and its own financial regulator. All other aspects are subject to state legislation.

Each free zone has its own list of organizational and legal forms of legal entities subject to registration. For example, joint stock companies, companies with one or more shareholders, branches of any companies registered outside JAFZA can be registered in JAFZA. And in Dubai Internet City, only an LLC or a branch of a company operating within or outside the UAE will be registered. 

The terms of registration differ. They do not exceed 30 working days in any FEZ (this is provided that all requirements are met). But in some cases, it can be done in 10-14 days. 

Requirements

Requirements for registering a business in the UAE

They can also differ significantly. For example, in some FEZs, the personal presence of an entrepreneur is required for business registration, in others it can be done remotely or through a representative. In some cases, the authorized capital is required for registration, in others it is not.

Having an office is a prerequisite for starting a business in Frison. However, somewhere it must be physical, and even a certain area, and in other places it is enough to have a virtual or just a flexi-desk (addresses without reference to a place). Renting an office implies the opening of visas for employees. Depending on the area, you can additionally obtain several permits to stay in the country. But the size of these areas and the validity period of visas are different everywhere.

The requirements also differ in the documentation that must be presented for registration. In some FEZs, collection, inspections and registration are highly bureaucratic. In such areas, further cooperation with the governing bodies will be accompanied by red tape, loss of time and nerves.

Licenses

This mandatory document is a work permit. There are four types of licenses that limit the scope of permitted commercial activities:

  1. Professional (service) services will be required for companies providing various types of services: medical, legal, consulting, engineering. This, depending on the free zone, costs from 8 to 15 thousand dirhams.
  2. Industrial is necessary for enterprises engaged in the production, processing, and marketing of finished products. It is the most expensive – the cost can reach up to 50,000 AED. At the same time, the requirements for its issuance are more stringent.
  3. Commercial. It will be necessary for entrepreneurs engaged in wholesale or retail trade, restaurant business, import-export supplies, e-commerce.
  4. Tourist. Its cost can also reach up to 50 000 AED, depending on the area and type of services provided. But on average it costs about 20,000 AED.

Each type of license has a more detailed list of types of permitted activities. The more of them the entrepreneur chooses, the more expensive the document will cost. At the same time, you will not be able to work with the same resolution in different directions. For example, you cannot develop industrial production and provide services under one license. Therefore, when selecting a FEZ, it is necessary to ask which license will have to be issued, whether one will be enough for the implementation of the project or several will need to be issued.

Some FEZs have a wide range of activities. Trade, industrial, and professional permits are issued there. But most of the zones have a narrow specialization and require a similar license. For example, Dubai Media City, where you can open a company dealing only with media or advertising.

Prices and reputation

Reputation

You have to pay for the administrative management of the FEZ. The price of the service is different everywhere, while the difference between the lower and upper limits is large – from 2 to 20 thousand US dollars. Many people have the misconception that the higher the fee, the better the administration is conducted. But this does not always advise the truth. In the UAE, they highly value reputation and try their best to win and preserve it. Nevertheless, it should not be judged only by the price of participation, it is better to look for other sources of information. However, it is definitely not worth saving on this budget item and choosing the cheapest zone.

In many countries, free zones are also organized on the territories of seaports and airports, which are called Designated zones. The UAE has them too. Their main differences lie in the customs rules and conditions for calculating VAT. We will talk about this in more detail in the next article. In the meantime, we suggest you watch the full video with an analysis of the main differences of the frison on our YouTube channel.

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Vladimir Sviridov
Vladimir Sviridov
General Manager RLC Consulting
With a Postgraduate Masters in Finance from The, Moscow State University, Russia. Vladimir started his professional career as an auditor of the financial sector of EY. After that, he worked for several years in senior positions in corporate banking. In 2018-2021, he managed the finances of a large agricultural holding, and is currently responsible for strategic planning, corporate partnership and financial management in the role of General Manager of RLC Consulting GROUP in the UAE.

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