Abu Dhabi, a thriving hub of business and investment in the United Arab Emirates (UAE), offers a variety of options for setting up companies. Among these, the Free Zone Establishment (FZE) has emerged as an increasingly popular choice for investors and entrepreneurs seeking to tap into the benefits of a tax-friendly environment and relaxed ownership rules. This article will provide an in-depth exploration of what FZEs are, their advantages, key features, and how to go about establishing one.
What is a Free Zone Establishment?
A Free Zone Establishment is a company set up in one of Abu Dhabi’s free zones, special economic zones where businesses enjoy certain tax benefits, streamlined customs processes, and more relaxed regulatory requirements. An FZE is essentially a limited liability company within the free zone, allowing the investor to retain 100% ownership.
Key Features of an FZE
Ownership
One of the standout features of an FZE is that it allows for 100% foreign ownership. This contrasts sharply with onshore companies, where a local sponsor holding at least 51% ownership is generally required.
Single Shareholder
An FZE can be set up by a single individual or corporate entity, making it ideal for small businesses and solo entrepreneurs.
Regulatory Flexibility
FZEs are subject to the rules and regulations of the free zone authority rather than the UAE’s federal business laws, offering a more relaxed and flexible business environment.
Custom Duties
Goods imported into the free zone are generally exempt from customs duties. However, if the goods are moved to other parts of the UAE outside the free zone, customs duties are applicable.
Tax Benefits
FZEs usually enjoy tax exemptions on profits, imports, and exports.
Confidentiality
Some free zones allow complete confidentiality regarding business activities, provided they are legal and within the scope of the free zone.
Advantages
- 100% Ownership: The single most attractive benefit, offering complete control over your business.
- Tax Exemptions: Profit and capital gains are usually tax-free for a certain period, often extendable.
- Easy Setup: Streamlined and simplified company setup procedures.
- Repatriation of Profits: Full repatriation of profits and capital is generally allowed.
- Access to Markets: Free zones often have excellent transport and logistics facilities, offering easy access to airports and shipping ports.
Regulatory Authorities
Free Zone Authority
Each free zone in Abu Dhabi is governed by its own Free Zone Authority, responsible for issuing licenses, setting rules, and supervising businesses.
Documentation and Legal Requirements
Company Formation Documents
The list of required documents may include:
- Business plan
- Passport copies of shareholders and directors
- Bank reference letter
Approvals and Licenses
All FZEs must obtain a business license from the Free Zone Authority relevant to their location and business activity. Licenses usually fall into one of these categories: Trading, Services, or Industrial.
Steps to Establish an FZE in Abu Dhabi
- Choose a Free Zone: Depending on your business activity and needs, select an appropriate free zone in Abu Dhabi.
- Initial Approval: Apply for initial approval and submit the required documents.
- Legal Formalities: Draft and sign the Memorandum and Articles of Association.
- Business License: Apply for the relevant business license and pay the corresponding fees.
- Bank Account: Open a corporate bank account in a bank of your choice.
- Office Space: Lease an office space as per the requirements of the Free Zone Authority.
- Finalize Registration: Submit all final documents to the Free Zone Authority for approval.
- Commence Operations: Once approved, you can start your business operations under the jurisdiction of the Free Zone Authority.