Expenses you must consider while setting up a business in a free zone

Posted by BRUCE on June 4th, 2019

“Cost is one major component to consider if you’re planning on setting up your own company in Dubai”

Many expatriates come to Dubai following their dreams and to have better lives. Whether you’ve just moved or you have been here for years and you want to venture out into the business world, then there are many factors worth considering before you decide to start your own company. The preliminary costs are the major deciding factors whether you’ll be able to take on onto this new challenge. To make it easy for you, we have put together a list of some of the main costs you’ll have to add to your overall expenses. Do keep in mind that the fees mentioned below are only an approximation and gives you an idea. The costs also will vary a lot depending on many factors, including the type of company, the business itself, its location and the overall needs of the business. There are always some extra small fees that will ultimately add up.

Dubai Free Zone Company Formation has many benefits and these include having 100% ownership and all exemptions from the import duties. The UAE has over 35 free zones spread over seven emirates, with Dubai being the most prominent among them. Some free zones are specialist free zones, and act as clusters of companies that engage in similar activities. Examples of such free zones are the Dubai Internet City, DIFC and Dubai Knowledge Park. Other free zones are trade-intensive, such as JAFZA. Some generalist free zones like DMCC, DWC and DWTC allow for a range of activities, from commercial trading to consultancy services.

Off late, most free zones have started to offer packages, that combine the license and registration fees with a desk-space.These usually come with a one-two visa option, with the DMCC being an exception – it offers 3 visas on a desk-space. Most free zones have these as permanent packages, but some like DAFZA and DWTC offer these packages as temporary startup initiatives, for testing the market.

Startup Capital

One-time cost - Varies

Most free zones do not require actual capital to be deposited in a bank account in the name of the company, during the formation process. Some exceptions are DMCC, TECOM Free Zones and KIZAD. However, in all cases, the money, even if deposited, can be withdrawn and used as working capital.

Office rent

Annual cost: Varies

The cost of the rent may vary based on the Free Zone your office is in. The space that you rent will also dictate the number of visas that your business can get. Your options include having a Smart Desk (Basically for freelancers or if no office space is required), an office space unit (one that is small and self-sufficient) and a permanent office (which is a full-fledged office space). There also may be additional service charges that will be calculated as a percentage of your total rent.

Some examples of office costs in free zones:

DMCC flexi-desk spaces – AED 18,000 (3 visa option)

DAFZA fitted office space – AED 50,000+

Office space in Dubai Knowledge Park – from AED 190 per square foot.

Free Zone licence

Annual cost: Varies, will be approximately AED 5,000 to 50,000

This fee is applicable for service, trading or industrial licenses. Varies based on the activity chosen, and the free zone. For example, trading licenses in JAFZA start from AED 5,500, whereas trading licenses in DMCC cost AED 20,000 per annum.

Free Zone registration

Annual cost: Varies, will be approximately AED 5,000 to 15,000

This fee will be paid to the Free Zone authority so that they can allow you to register your company. The cost will differ based on the Free Zone and the company type, such as an FZE or a Free Zone Establishment or a Branch Company. In some cases, these charges may be waived as special offers.

Establishment card

Cost: Varies, will be approximately AED 1,000 every 3 years

Every free zone company is issued an establishment card by the free zone authority. This card is used to apply for visas in the name of the company. Usually costs AED 1,000 per year, with some free zones issuing establishment cards with three-year validities.  

E-channel

Except in Dubai free zones, all free zone companies have to register on the e-channel, which enables application of visas online. The fees have two components:

e-channel registration – usually AED 1,500+ (one-time)

e-channel deposit – usually AED 2,500+ (refundable)

Visas

Unlike the mainland, where visas have two-year validity, most free zones issue employment visas with three-year validity.

Visa cost – from AED 1,500 per visa

Visa deposit – from AED 2,500 per visa (refundable, applicable in most free zones)

Other expenses

The other miscellaneous expenses incurred include:

Making a Company Stamp – AED 100

Applying for a P.O. Box– AED 1,000 per annum for basic services.

Both are essential in doing business in the UAE.

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