In 2022, Dubai was rated first globally as the best ecosystem for entrepreneurs and startups. Dubai owes this achievement to innovative government policies enabling business investment from all around the world. One such policy is the establishment of Free Zones in Dubai.
The emirate has built these specialized economic zones throughout the city to pivot from oil revenue and create economic diversification gradually.
What are these free zones in Dubai, how can they benefit businesses, and what are some of their drawbacks? Let’s find out!
What is Free Zone in Dubai?
Dubai Free Zones are special economic regions within the emirate of Dubai that enjoy exemption from corporate taxes.
In addition to tax exclusion, businesses in these zones also enjoy other benefits and incentives, such as
The primary goal for creating these regions is to facilitate business establishments.
The Dubai Free Zone (DFZ) was the first free trade zone in the Middle East. It was established in 1985 to ease international trade and foreign investment. Today, there are more than 20 Free Zones in Dubai and more than 40 in the seven emirates.
The Free Zones of Dubai and UAE are controlled, governed, and regulated by the Free Zone Authority. This authority is responsible for issuing licenses to foreign businesses to operate in the Dubai Free Zones.
Statistics indicate that Dubai has seen a remarkable economic impact due to its Free Zones. These specialized zones have enabled the city to attract substantial foreign investment over the past few decades, ultimately driving the emirate’s economy positively.
These Free Zones are also why Dubai is a coveted financial hub today. Many entrepreneurs, investors, and business owners are eager to take advantage of this business-friendly environment. Many government offices are also found in these Free Zones today.
List of Free Zones in Dubai
The world’s most open and business-friendly Dubai Free Zones are listed below:
- Dubai Design District
- Dubai Airport Free Zone
- Dubai CommerCity
- Dubai Gold and Diamond Park
- Dubai Internet City
- Dubai Healthcare City
- Dubai International Financial Centre
- Dubai Logistic City
- Dubai International Academic City
- Dubai Media City
- Dubai Maritime City
- Dubai Knowledge Park
- Dubai Science Park
- Dubai Studio City
- Dubai Multi Commodities Centre (DMCC
- Dubai Production City
- Dubai Silicon Oasis
- Dubai World Central (Dubai South)
- Dubai Textile City
- International Humanitarian City
- Dubai World Trade Centre
- Jebel Ali Free Zone
- Meydan Free zone
Benefits of Starting a Business in Free Zones Dubai
It is obvious that Free Zones in Dubai are beneficial for business owners and entrepreneurs. However, some advantages go beyond the obvious.
Here’s an in-depth look at the benefits of starting and running a business in a Free Zone in Dubai.
1. Complete Business Possession
Establishing a business in Dubai Free Zones allows the owner to have complete ownership of that business, regardless of their nationality. This eliminates the need to find a sponsor who is a UAE national for the formation of the company.
2. Lack of Currency Restrictions
Governments normally regulate foreign currency to protect the country’s economy and maintain a balance of payments.
The Dubai Free Zones are exempt from such regulations and restrictions, making financial transactions much easier for entrepreneurs.
3. Exemption from Import and Export Duties
The Dubai Free Zones are exempt from import and export duties. This encourages business and trade as business owners stand to make more money while spending none on duties.
4. Tax Exemption
Free Zones are also 100% exempt from all types of taxes, such as corporate and income tax. Tax exemptions mean more profits and, thus, more opportunities to reinvest.
5. Easier Repatriation
Companies and businesses operating in the Dubai Free Zones enjoy full repatriation benefits. This makes profit repatriation and financial asset repatriation incredibly easy.
6. Streamlined Labor Hiring
Recruiting labor in Free Zones is easy and cost-effective. Companies and businesses can also easily hire foreign nationals.
7. Ample Workspaces
The spaces for offices and warehouses are readily available in these Free Zones. This makes setting up and running a startup or an SME in Dubai quite appealing.
You can also read about top coworking spaces in Dubai here.
8. Trouble-free Company Incorporation
The company incorporation process in Dubai Free Zones is quick, simple, and straightforward. These procedures are designed to facilitate the investors and eliminate red tape.
9. Easy Immigration Procedures
Entrepreneurs, business owners, and investors interested in establishing a business in Free Zones don’t have to go through extended and complicated immigration procedures.
10. Modern Communication and Excellent Infrastructure
Free Zones in Dubai have modern technology and communication systems. In addition, the infrastructure is of the highest quality, facilitating business activities significantly.
Disadvantages of Free Zones in Dubai—Limitations for Investors
Companies in Free Zones may face some drawbacks. Let’s discuss each of them.
1. Trade Restrictions
Trading companies in Dubai Free Zones are prohibited from doing business in the Dubai mainland. If a Free Zone company wants to conduct business in Dubai Mainland, it needs specific documentation and licenses from Dubai’s Department of Economic Development (DED).
Acquiring such permissions can be difficult. Due to that, many Free Zone companies hire a DED-Licensed operator to conduct business in the mainland or establish an LLC by establishing a branch office in mainland Dubai.
2. Restrictions on Expansion to UAE Markets
The companies in Free Zones are treated as offshore businesses. As per law, these companies are limited to conducting business activities within their free zone. They are not allowed to operate in other UAE markets.
If a company or startup wants to target the UAE market, setting up their business in a Free Zone might not be a wise decision.
3. Limited Workspace Options
Since the companies set up in Dubai Free zones are restricted to only those areas, they have limited options in terms of office space.
Due to this reason, companies might end up paying more rent for such spaces due to high demand, low supply, and monopoly of that particular Free Zone jurisdiction.
4. Limitation of Business Activities
Depending on the specifications of a Free Zone, a company might be limited in the scope of its activities. For example, a business set up in a Free Zone designed for the tech industry will not be able to conduct business in another industry.
Final Words
Whether it is a real estate company or a tech startup, Free Zones in Dubai offers great incentives. This can include tax exemption, a streamlined business setup process, and a business-friendly environment. However, these zones are not for everyone.
If you want to establish a business in Dubai Free Zones, take time to assess your future goals and whether the limitations of a Free Zone can affect those ambitions.
