Pros and cons of free zones in UAE

After observing the progressing economy, zero taxes on income and profits, luxury lifestyle facilities, political stability and negligible crime rate drag investors and entrepreneurs across the world towards UAE to initiate their business to enjoy these tempting benefits. You can easily see a huge number of company owners from multinationals to small startups, are relocating Dubai, UAE to launch their office unit or manufacturing plant. However, purposeful efforts of the State Government, financial institutes and developers have enabled the United Arab Emirates to create a strong image in the international trading community. Despite owning all the positive references, when it comes to setting up an enterprise in this region, finding a suitable place to set up a firm is the primary concern of every investor, whether being local or foreigners. To set up a firm in an offshore location, business owners have to find an eligible local partner.

Perhaps, the local partnership restriction might not interest you; then you must be looking for alternatives to become an enterprise owner in Dubai with exclusive ownership rights. Then, free zones are welcoming everyone to start their set up without sharing ownership rights with native Emiratis. Total 37 UAE free zones are established across this Middle Eastern territory with an aim to promote overseas investors. After considering nature and size of their firm, they can register their firm in any of the suitable free zone.  Market aggregates have showed the sizeable earning of 11.85 billion dollars in 2014. Today they are reported to host 40% of direct foreign investments in the country.

Here I am weighing up few of the major pros and cons of opening a firm in Dubai free zone.

  1. As these zones are meticulously designed to provide commercial space and infrastructure facilities to owners, it becomes easier for investors to select a suitable space to start their set up without any doubts.
  2. Their close proximity to highways like Shaikh Zayed Road makes them very suitable to establish virtual offices, warehouses, franchises and showrooms. Small business owners who don’t possess huge capital can also take advantage of renting a small space to obtain license.
  3. It allows foreigners to establish their offices, with complete ownership rights without seeking 51% partnership of local Emirati. You will enjoy 100% ownership.
  4. In addition to exclusive ownership rights, visa processing rules for the recruited employees are unique as compared to rest of the territory. The state government also offers financial support after relieving them from all kind of corporate, personal income and capital gain taxes. However, authorities have imposed a six months ban on employees who left companies before completing two years of service period.
  5. Overall, they successfully created a regulatory environment while promoting the learning process. They also played an important role to diversify the traditional face of the UAE economy from oil based after providing ample space for commercial offices and manufacturing plants.

Now let’s discuss few cons

  1. Business owners have to pay a lump sum amount as initial share capital. Depending on the zone, this amount ranges from Dh50, 000 to Dh1 million. IN contrast to that offshore don’t demand any kind of capital.
  2. Property rents and prices are higher in free zones as compared to onshore counterparts, however, in some cases, it is not true, for example, Silicone Oasis offer office spaces on rents of only Dh30, 000 per year. Whereas leasing an office space in Downtown costs around Dh50, 000-Dh60, 000 a year.
  3. They can’t directly trade with companies and customers in offshore locations. They have to hire a commercial agent or distributor to carry out business activities. According to state laws, enterprises located here are not allowed to trade with the rest of country. Especially service providers are restricted.

Summary: In order to make a wise decision, being an entrepreneur, you should consider these pros and cons of free zones to select the best option for you.

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