Company building
Exploring the Real Costs of Establishing a Freezone Company in the UAE
Every year, more than 180,000 companies incorporate in the UAE, with a significant portion of them opting for a Freezone entity.
Zahan Backer
Sat Oct 07 2023
Every year, more than 180,000 companies incorporate in the UAE, with a significant portion of them opting for a Freezone entity. A Freezone, also known as a free trade zone or free zone authority, represents an economic area with its own distinct regulations that don't apply to businesses outside the zone. Freezone companies engage in trading services and products, capitalizing on special tax incentives and foreign ownership laws.
Within the UAE, there are over 40 Freezones, each with its unique set of laws, making them easier and more cost-effective to maintain. The establishment of Freezones was a response to previous sponsorship laws, which required at least 51% ownership by a local Emirati citizen. While these rules have evolved, allowing foreign founders to own 100% of a mainland or Freezone company, Freezones remain immensely popular for entrepreneurs kickstarting their businesses in the UAE.
Understanding the Costs of Operating a Freezone Company
While Freezone companies offer numerous advantages, it's essential to consider the financial aspects of both setting up and maintaining them. To gain a comprehensive understanding of these costs, let's categorize them into two primary sections: the expenses associated with forming a Freezone company and the ongoing costs required for compliance.
The Costs of Establishing a Freezone Company
Setting up a Freezone company is the initial step, and the associated fees vary based on your chosen Freezone jurisdiction. Price points depend on factors like the Emirate, industry focus of the Freezone, and the services you require.
For online businesses, the specific Freezone chosen may not be as critical as long as you can secure a bank account and access the UAE's financial infrastructure. On average, incorporation with one investor visa may cost around $4,000, while a license without a visa may be approximately $2,500.
Ongoing Costs to Maintain a Freezone Company
Sustaining a Freezone company in the UAE involves annual expenses to ensure its continued operation:
- Annual Fees: Freezone companies must file annual reports and pay associated fees. These fees vary by jurisdiction and business size, but typically, license renewal costs are similar to initial issuance costs.
- Visa Fees: Depending on the type of Visa that you get, you will need to renew your visa, at least, once every two years.
- Business Compliance: Depending on your business activities, you may need to obtain licenses and permits, incurring upfront and recurring costs. Research your specific requirements based on your Freezone company's operations.
- Business Insurance: Adequate insurance coverage is essential for protecting your business from unforeseen events. While general liability insurance offers comprehensive protection, industry-specific needs may require additional policies. Premiums vary based on policy size and coverage.
- Taxation: Freezone companies, like all businesses, are subject to taxation once they reach a specific threshold. The UAE's tax system includes considerations like Value Added Tax (VAT) and Corporate Income Tax. Assess how these taxes impact your overall maintenance costs.
- Registered Agent Service: Freezone companies often need a registered agent within the same jurisdiction. Such services typically cost up to $300 per year. Opting to be your registered agent can save money but entails managing your company's mail and legal affairs.
Conclusion:
Establishing and managing a Freezone company in the UAE opens doors to numerous growth opportunities. After forming your Freezone company, prioritize compliance. DOYOU offers comprehensive services to guide you through the process, from setting up your Freezone company to managing its growth and success.
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