5 benefits of forming a free zone company in the UAE

The United Arab Emirates (UAE) government has established more than 40 free zones across the Emirates, each designed for a specific business activity. Within these zones, free zone companies are allowed to trade a diverse range of goods, services, and resources while benefiting from special tax incentives, foreign ownership laws, and many more advantages.

Now, let’s explore the five benefits that UAE free zones can offer you.

1. 100% foreign ownership

One of the most obvious benefits of establishing a free zone company in UAE is complete foreign ownership. Expat business owners can solely own the business setup regardless of their nationality, without requiring a local sponsor.

In contrast, businesses situated within the mainland jurisdiction must find a UAE national who holds a specific percentage of their companies, leaving the foreign business owners with a maximum of 49% ownership. However, this restriction does not apply within the free zones, where entrepreneurs from abroad can retain 100% ownership and control over their businesses.

2. Corporate and personal tax benefits

Free zone companies in the UAE had long enjoyed an absolute 0 % corporate tax until UAE Corporate Tax Law (CTL) came into effect in 1 June 2023. While the standard statutory corporate tax rate is set to be 9%, the UAE’s corporate tax regime continues to offer a 0% corporate tax rate for free zone companies but only for “Qualifying Free Zone Persons” (QFZP) and subject to certain conditions. It is important to note that a QFZP will still be subject to a 9% corporate tax rate on any income that is not Qualifying Income.

The implementation of the CTL marks a significant development in the UAE’s tax policy, reflecting the nation’s efforts to align with global standards while maintaining its competitive edge. Despite this change, the new 9% rate remains considerably lower than the global average of 23.45%, according to the Tax Foundation, positioning the UAE as an attractive destination for businesses seeking favorable tax environments.CopyRe

3. Import and export duty exemption

The UAE free zones are exempt from import and export duties. Companies operating within the UAE free zones can import raw materials, components, and finished goods without incurring the usual customs duties. Similarly, companies can export goods manufactured or processed within the free zone without encountering export duties.

By eliminating import and export duties, the UAE free zones encourage businesses to engage in diverse trade activities, foster economic growth, and attract foreign investment. This incentive also supports businesses in saving costs, maintaining competitive pricing in the global market, and enhancing their overall competitiveness and profitability.

4. No currency restrictions

The procedure of conducting business for entrepreneurs is made simpler by the elimination of any form of currency limitations in UAE free zones. Unlike certain regions that might limit the use of different currencies for business transactions, companies in UAE free zones have the freedom to engage in cross-border activities using various currencies.

This feature holds particular significance for businesses involved in international trade. It enables businesses to seamlessly interact with international partners, clients, and suppliers, eliminating concerns about currency conversion limitations and intricate regulatory procedures.

5. Easy company setup

Most UAE free zones have a one-stop-shop facility that provides all the necessary services to set up a company, such as company registration, licensing, visas, and permits. Therefore, setting up a company in the UAE free zone is straightforward and efficient compared to setting up a company outside the free zone.

However, it’s worth noting that regulations can vary between different free zones. Some free zones have more relaxed regulations, while others have specific requirements for certain industries. Therefore, it’s essential for businesses to evaluate legal and licensing requirements, and to ensure these regulations match with business activities and long-term objectives.

Healy Consultants Group provides a wide range of corporate services across the world. Email or WhatsApp us now to find out more about our services.

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