All you need to know about Free Zone Establishment (FZE) in the United Arab Emirates (UAE)

When foreign investors want to open a business in the United Arab Emirates (UAE), Free Zone Establishments (FZEs) are becoming more and more popular. An FZE is a legitimate business structure that permits 100% foreign ownership and offers several tax and regulatory advantages, making it a desirable choice for business owners.

But it's crucial to know the benefits and drawbacks of this structure before deciding to establish an FZE in the UAE. In this article, we will define FZE in the UAE, examine whether it is challenging to set up a business and obtain a director's residency permit, and discuss the advantages and disadvantages of establishing an FZE in the UAE, emphasizing the important factors that businesses should take into account when making this choice.

What does FZE mean in the UAE?
Free Zone Establishment is referred to as FZE. In some countries, such as the United Arab Emirates, it is a common legal business structure.

Companies in a free zone can have a 100% foreign ownership structure and are exempt from some taxes and rules that are imposed on companies that operate outside the zone. Such industries as technology, media, and logistics are just a few of the business activities or industries that free zones frequently focus on.

An FZE is a limited liability company with up to 5 shareholders or owners, who may be an individual or a company. FZE is a well-liked option for small and medium-sized businesses that want to benefit from operating in a free zone, such as the freedom to import and export goods without having to go through customs procedures and the freedom to repatriate profits without limitations.

Is incorporating FZE challenging?
Depending on the jurisdiction of the Free Zone you choose, the process of incorporation of an FZE may differ, but generally speaking, it is a fairly simple and straightforward process.

A business plan, identification and address proof, and financial statements are just a few of the documents and pieces of information that might be required from the business owner or their representative in order to incorporate an FZE. The requirements could also change based on the kind of commercial activity the FZE will be conducting. Some of the Free Zones have fewer requirements for incorporation, and the list of mandatory documents can be significantly shorter.

The process of incorporating the FZE typically entails registering the business with the free zone authority, obtaining necessary permits and licenses, and opening a corporate bank account once the required paperwork and information have been provided. Depending on the particular requirements of the jurisdiction and the complexity of the business structure, the entire process can usually be finished in a few weeks or months, with the company and trade licence being registered within the first week.

Nevertheless, it is advised to enlist the aid of a knowledgeable legal or business advisor who is acquainted with the procedure for incorporating an FZE and can offer direction and expertise throughout the process. Persona Finance offers full support service during the incorporation of FZE. You can read more about our service on our dedicated page for FZE in the UAE and schedule a free consultation with a specialist.

As the director of an FZE, can I have a residency permit in the UAE?
If you wish to live and work in the UAE, you will be able to become a UAE resident due to the directors of FZEs being qualified for a residence permit, also known as a director or an investor visa.

The specifications for receiving a residence permit will be determined by the country's and the free zone's unique laws and rules, where the FZE is registered. Generally speaking, directors must present identification documentation, have a valid passport, and undertake a medical examination and/or criminal background check.

The procedure for obtaining a residence permit can be complicated, so it is advised to seek the advice of a qualified specialist or a business advisor who is knowledgeable about the requirements and guidelines for obtaining resident status in the country where the FZE is registered. Persona Finance provides full-end supervision of all procedures required to get a residence permit in the UAE.

What are the benefits and drawbacks of FZE in the UAE?

The advantages of setting up an FZE in the UAE include
  1. One of the biggest benefits of establishing an FZE in the UAE is that it permits 100% foreign ownership without the requirement of a local sponsor or partner;
  2. Tax advantages: FZEs are typically exempt from corporate tax, personal income tax, and customs duty. For businesses, this could mean significant savings;
  3. Simple Business Setup: The UAE has a relatively simple and easy-to-understand FZE setup process with little in the way of paperwork or bureaucracy;
  4. Market Access: The UAE is ideally located for businesses that want to access the markets in Europe, Asia, and Africa due to its strategic location between these regions;
  5. World-Class Infrastructure: The United Arab Emirates has first-rate telecommunications, transportation, and port facilities. Businesses may benefit from this and be able to work more effectively as it gives them a competitive edge.

Disadvantages of setting up an FZE in the UAE include
  1. Limited Business Activities: The kinds of business activities that FZEs may conduct are typically restricted. For example, certain free zones don't work with financial and legal services. This shall not mean that you will not be able to set up an FZE in any of the Free Zones; however, all zones focus on specific business activities, meaning that your choice of zone will be somewhat limited;
  2. Although FZEs are exempt from some taxes, they may still be subject to other fees and charges that could raise their operating costs, especially given the requirement to renew the registration of the company and the trade licence annually;
  3. Compliance with Regulations: FZEs must comply with a number of rules and regulations, which can be difficult to understand and time-consuming to complete. To avoid fines or other consequences, it's crucial to make sure that your FZE complies with all applicable laws and regulations.

In conclusion, foreign investors looking to conduct business in the area may find it appealing to establish a Free Zone Establishment (FZE) in the United Arab Emirates (UAE), as FZEs allow 100% foreign ownership and are typically exempt from certain taxes and rules that are imposed on companies conducting business elsewhere. Additionally, the procedure for incorporating an FZE is fairly simple and your business can start operating within the first weeks.

Nonetheless, the Persona Finance team recommends having an initial consultation with a specialist to be 100% certain that all the relevant requirements are met and that the incorporation of an entity is completed smoothly and stress-free. Seeking the assistance of a qualified legal or business advisor who is familiar with the process of incorporating an FZE can help ensure that the process is compliant with local regulations and that the business is set up for success in the UAE. To schedule a free consultation with our lawyer, please leave send us an email at or follow the link.
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