Company Formation in Dubai through a Free Zone Company: What You Should Know

18 Apr 2022

A free zone is a defined and isolated area, with a special tax, legal, customs and import regime. The main advantage of owning a company in a free zone is that as an expatriate, you can own the company 100% without having to give up any of your shares. The disadvantage is that a Freezone company can only do business within its specific free zone or outside the UAE unless they have received approval from the Department of Economic Development and are licensed to carry out their activity in Mainland Dubai. It cannot provide its services or sell its products in any UAE jurisdiction other than its Free zone. The minimum cost to register a free zone entity in Dubai is AED 13,900, bearing in mind that these prices may vary depending on the free zone and the activity the company will undertake. For more legal clarification, approach corporate lawyers regarding company formation and registration of free zone entities in Dubai.

To create such a company one should refer as stated above, although most free zones’ legal regimes do not allow free zone companies to conduct business in the mainland, according to Law Number 13 of 2011 the Department of Economic Development (DED) is the only responsible authority in Dubai to deliver licenses outside the free zones. No free zone company is allowed to perform business projects in Dubai outside its free zone as long as it has not been allowed by the DED. When they receive such license they can create new entities under the forms of civil work company, limited liability company or branch.

Concerning the activities availed to free zone entity’s branches, they can conduct any activity allowed for free zone companies on two conditions:

  1. The activity of the branch must match the activity of the company
  2. Yet, there are limits, and a branch will not be allowed to conduct labour supply, commercial agencies or restaurant activities.

In a conclusion, even though there is a legal groundwork for free zone companies to conduct their activities in the mainland, there are still limitations for such possibility, mostly related to the activities the branch can conduct. In Dubai, corporate Lawyers have termed as a regulation issued by the Jebel Ali Free Zone Authority. Thus, so far the mainland’s environment is not yet completely free zone friendly.