FREE ZONE BUSINESS ENTITIES

In general, three options exist for those wishing to set up in a free

zone. A business wishing to operate from a free zone can either

incorporate a free zone establishment (FZE), a free zone company

(FZC) or operate through a branch office of a foreign or

local company. Branch offices are designed to be opened with a limited amount of administrative formality,

FZE

An FZE in the JAFZ requires a minimum capital of AED1,000,000.

The minimum capital requirement represents one share and it can

only have one shareholder.

FZC

The minimum capital required to incorporate an FZC is AED500,000

and an FZC can have between two and five shareholders. Each share

must have a minimum value of AED100,000 or multiples thereof and

there can only be one class of share.

The FZC must have a board of directors, consisting of a minimum of

three people and having at least two directors and one secretary

(although a person may hold both the offices of director and secretary

within a company simultaneously). These individuals must be resident

in Dubai.

RIGHTS OF FZE’S AND FZC’S

Ownership

One hundred per cent foreign ownership and full repatriation of

profits and capital is permitted.

Tax

Exemption from corporate and income taxes for a determined period,

regardless of subsequent changes to local laws.Goods may be imported

into the free zone, free of duty.

Incorporation

It is relatively straightforward to set up a company in a free zone. The

first step is to complete a questionnaire issued by the relevant FZA.

Once the questionnaire has been considered by the FZA the company

will be required to provide the FZA with information on individual

and corporate shareholders.

Individual shareholders are required to provide a personal profile

which may include a business background, specimen signatures,

domicile and address.

Corporate shareholders are required to provide:

a certificate of registration or good standing;

b memorandum and articles of association;

c board resolution authorising the incorporation of the FZE or FZC;

d powers of attorney in favour of the FZE/FZC managers; and

e audited financial statements for the last two financial years

Employment

Companies operating within the free zone are generally entitled to

employ who they wish. However, various administrative requirements

must be complied with such as providing the FZA with certain details

of the licence holder’s employees.

While rates of pay are not specifically regulated, a minimum salary is

stipulated in the JAFZ. Overtime rates are regulated by the FZA and

shift working must be notified to the FZA

Working hours are regulated and these are shortened during the Holy

Month of Ramadan. The shortened hours apply to all employees,

regardless of religion.

Employee numbers are restricted according to various criteria,

including office area and machinery installation.

TECOM

The TECOM requirements are slightly different as the regulations only

provide for limited liability companies, composed of between one and

50 shareholders. The current minimum share capital for a TECOM limited

liability company is AED50,000 and the share capital may, upon the

appropriate approvals being received from the authorities, be divided into

different classes of shares. Each TECOM limited liability company is

required to have at least one director and may have a maximum of four

directors.