If you are an importer, trader, logistics company, or some other organization with international reach and operations, consider business setup in a Dubai free zone. Many things point to Dubai as an ideal base for global enterprises.
1. The Dubai International Airport
The Dubai International Airport (DXB) ensures smooth supply chain and logistics processes. This highly efficient airport can handle 87 million guests (2023 data) and 77.5 million bags, with a high baggage handling success rate of 99.8%. This translates to only 2.4 mishandled bags per 1,000 passengers.
The Dubai airport is not only efficient. It also has affordable air freight rates. Since 92 airlines fly from Dubai to 325 destinations, there’s healthy competition among carriers. This helps keep freight prices in check.
2. The Seaports
Dubai’s moniker as an international logistics hub is well-earned. In addition to the efficient DXB, Dubai has three major seaports: Mina Jebel Ali (AEJEA), Mina Rashid (AEDXB), and Mina Al Hamriyah (AEHAM).
Port Jebel Ali is a technologically advanced seaport with three terminals and another on the way. It was built and designed to handle container and cargo operations. The tenth largest seaport in the world, it has a handling capacity of 19.3 million 20-foot containers or 20-foot equivalent units (TEU). Additionally, Dubai’s modern and efficient road system ensures excellent connection to the Dubai International Airport, other places in the city and the rest of the UAE.
Port Rashid primarily serves as a cruise tourist destination, able to handle up to seven mega-cruise vessels – equivalent to 25,000 passengers – at once. The port handles non-containerized and break-bulk cargo and roll-on/roll-off cargo ships.
Port Al Hamriya is an import and export hub that serves the needs of various types of vessels, including traditional dhow boats and medium-sized ships. It’s close to the local market, so it’s a favorite among livestock importers and commercial fishing vessels.
3. Location
Additionally, Dubai’s location in the Middle East, near Europe and Africa provides businesses with a strategic advantage. Operating from Dubai puts you within four hours’ flying reach of 33% of the world’s population and eight hours of 66%. Therefore, when you operate a clothing retail business from Dubai, you can significantly expand your international reach.
4. Financial Incentives
Dubai does not charge taxes on personal income. It used to charge no corporate income taxes, too, but that changed in 2023. However, even though the federal corporate tax (CT) has become universally applicable in the UAE, the 9% corporate tax rate remains low compared to other key global markets.
The 9% CT rate also only applies to annual taxable income above AED 375,000. Additionally, based on the guidance released by the UAE federal tax authority, businesses in free zones may continue to enjoy their 0% corporate tax rate on qualifying income.
Qualifying income must satisfy certain conditions. For instance, it should come from transactions with other free zone entities. Other income may still be deemed qualifying as long as its percentage of non-qualifying income does not exceed the 5% de minimis limit.
Free zones, in particular, provide other fiscal incentives. They provide a 100% exemption from import and export duties and permit 100% repatriation of capital and profits.
5. 100% Foreign Ownership
In Dubai, foreign entities can own 100% of real estate in freehold areas. This is an excellent incentive for doing business in Dubai. Enterprises may consider putting down roots and planning long-term because they can have absolute control over their real estate.
Free zone companies may also be 100% foreign-owned. This privilege also now extends beyond the free zones since the UAE has amended its laws to allow foreigners to establish 100% foreign-owned companies in the UAE mainland, as long as they are engaged in the commercial and industrial activities tagged for 100% foreign ownership.
Note: If you attain the minimum investment amount plus the real estate purchase threshold, you can apply for the UAE’s 10-year or two-year investor visa.
Free Zone or Mainland?
After deciding on establishing a business in Dubai, you have a choice to make. Should you set up a business in a UAE free zone or the mainland (non-free-zone)? It depends on your requirements.
Choose the free zone option if you don’t plan to do business in the UAE mainland. Free zone companies may not do business in the UAE mainland, although there are workarounds, such as establishing a branch.
Otherwise, set up a business in the mainland. If you import coffee to sell to coffee shops and home brewers in Dubai, build houses in the UAE, and provide accounting services to UAE companies (both in the free zones and the mainland), you must establish a mainland company.
It may be easier to start a business in the free zone. Free zones are under the jurisdiction of free zone authorities. These typically have streamlined business setup procedures, with readily available business packages and company formation consultants.
In contrast, you will need many government approvals and permits when you start a business in the mainland. Of course, your free zone company may be subject to government approvals if your business plans involve closely monitored and strictly regulated economic activities.
Beyond Dubai
There are many free zones in the UAE, so your company formation opportunities are not limited to Dubai. Business setup in an Ajman free zone is a good option. Ajman has two free zones you can choose from: Ajman Free Zone and Ajman Media City Free Zone. The emirate may not have an airport for now, but the construction of the Ajman International Airport is already underway. Ajman also has a seaport, Ajman Port.
Sharjah, Ras Al-Khaimah, Umm Al Quawain, Fujairah, and Abu Dhabi also have free zones. All of these emirates have their strengths. For instance, Sharjah is adjacent to Dubai, so Dubai’s entertainment, recreation and logistics facilities are well within reach. At the same time, you can enjoy Sharjah’s relatively lower cost of living and doing business.
Doing Business in Dubai
Dubai is an excellent address for your business. If you need a base for your international operations, set up a business in a Dubai free zone. You may also consider free zones in other emirates. If you plan to do business in Dubai and the rest of the UAE, set up a company outside a free zone, in the UAE mainland.