Company formation in Dubai: Advantages and disadvantages of free zone business

Several foreign nationals are looking forward to company formation in Dubai as the emirate is one of the best places to do business. Moreover, with the introduction of vat on January 1, 2018, the generated revenues are estimated to grow by Dh12 billion in the first year making Dubai the most wanted place to do business with ease.

Company formation in Dubai is easy especially when foreign companies are looking forward to opening their branches. This is because Dubai has set up free zones to boost economic where the companies have to pay minimal taxes or no taxes at all. Companies can manufacture, process, receive and even re-export goods. The customs authorities never intervene.

Expatriates look forward to company formation in Dubai in the free zones because these places have a proper business environment. The free zones give optimum support so that the companies can do business efficiently. Dubai attracts a lot of direct foreign investment as the free zones offer a wide range of money-spinning benefits.

There is also the option for offshore company formation in Dubai. There are several consultancies that help with the process. However, there is only a little difference between offshore company setup and a free zone setup. The company details are kept anonymous for an offshore company, but information for a free zone company is available on request.
Companies that would like to do business in the free zones of Dubai must understand that there are disadvantages as well along with the advantages of the free zone set up. Companies must thus understand and consider all the advantages and disadvantages before finally deciding the venue for opening the branch.
Let us have a look at the disadvantages first:
  • Only a few types of business allowed: Free zones only allow certain types of business. And that too depends on the type of free zone. A free zone which is a technology hub only allow related business and nothing else. So companies must always choose the free zone according to their type of business.
  • Restrictions on trade too: A company that has registered itself in the free zone cannot indulge in any business activity within the country’s other markets. It can only conduct business within the free zone. If the company wants to enter the local business market, they must do it through local distributors.
Here is a look at the advantages of opening a business in a free zone.
  • World-class services: The free zones offers the companies with excellent service in terms of amenities and infrastructure. A free zone area is an excellent platform because the companies can operate for 24 hours. Energy is available at a low cost, and there is an abundance of it.
  • Government support and tax-free zones: The free zones receive a lot of support from the government. There is also administrative support as well. These zones are made tax free by the government, and thus the companies can take home their profits. Moreover, the companies have 100% ownership.
The free zones are set up in the proximate areas which is one of the disadvantages. However, the roads and transport system is so good that reaching these places are no problem at all.
These are a few of the advantages and disadvantages of opening a company in the free zone business area of Dubai. However, despite the restrictions and limitations, the free trade zones still attract a lot of business. Companies must think about the priorities, consider all the aspects and then open the branch.

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