Establishing a business in the United Arab Emirates (UAE) presents a myriad of opportunities, each with its unique advantages. One of the foremost decisions entrepreneurs must make is choosing between setting up in a free zone or on the mainland. This decision is pivotal as it significantly impacts cost structures, operational freedom and long-term business potential. This article provides an overview of the business set-up in the UAE, comparing costs between mainland and free zone companies. Additionally, a detailed comparison of the process and price associated with each business type and the benefits of setting up in the RAK free trade zone (RAKEZ) will be discussed.
Businesses operating onshore in the Emirates referred to as the UAE mainland companies, abide by state laws. Depending on factors such as business type, liability, ownership and registration, entrepreneurs can choose to establish a mainland business as a limited liability company with up to 50 shareholders or as a sole proprietorship. Licences and registrations for mainland businesses are issued by the Department of Economic Development (DED), facilitating integration into the local economy. This set-up offers strategic advantages for businesses looking to operate within the UAE mainland, leveraging its robust economic framework.
In contrast, free zone companies benefit from tax exemptions, full foreign ownership rights and seamless profit repatriation. These zones are strategically located near key logistics hubs, facilitating efficient business operations and global connectivity. Ras Al Khaimah (RAK) free zone stands as a prominent player among the 40+ multidisciplinary free zones present across the United Arab Emirates.
The cost of incorporating a mainland company in the UAE tends to be higher due to the complexities involved in setting up and operating within the mainland. Comparing costs, a basic business set-up package, which includes only a licence and essential services, can be significantly more expensive compared to those available in a free trade zone. In contrast, free zones offer a more cost-effective solution for business set-up. RAKEZ, for example, provides an all-inclusive business set-up package with a visa priced at AED 16,500 per year. This package covers all the necessary services and offers a more affordable option for launching a company compared to mainland alternatives. Choosing a free zone like RAKEZ not only helps in reducing initial costs but also simplifies the process with streamlined procedures and fewer regulatory compliances. This approach can be particularly advantageous for startups and small to medium-sized enterprises looking to optimise their budget while maintaining operational efficiency.
One of the most significant advantages of establishing a free zone company is that foreign investors can retain 100% ownership without the need for a local sponsor or partner. This enables investors to maintain full control over their business operations and make strategic decisions independently.
Previously, free zone companies in Ras Al Khaimah benefited from complete tax exemptions, including corporate tax, personal income tax and import and export duties. However, from June 2023, companies generating an annual profit exceeding AED 375,000 are subject to a corporate tax rate of 9%. Despite this change, it remains one of the world's lowest corporate tax rates, presenting a substantial advantage for foreign investors looking to minimise operational costs and maximise profits when comparing costs of business set-up in the UAE mainland versus a free trade zone.
Another benefit of setting up a business in Ras Al Khaimah free trade zone is the absence of currency restrictions. Investors can freely repatriate all profits and capital, facilitating seamless management of financial operations. This feature is particularly advantageous when comparing costs and operational efficiencies between setting up in a UAE free zone and mainland.
The process of setting up a business in the RAK free trade zone is relatively straightforward. It features a streamlined registration process and minimal paperwork, making business set-up in the UAE efficient and cost-effective. This ease of establishment enables investors to commence operations swiftly, providing substantial free trade zone benefits.
Free zone companies in Ras Al Khaimah enjoy access to a vast network of global markets, spanning Europe, Asia and Africa. This facilitates business expansion and enables companies to reach new customers, ultimately driving increased profitability and success. Book a free business set-up consultation with experts at RAKEZ to understand the price and process differences between mainland and free zone companies. This will help you determine the most suitable area for your business according to the nature of your chosen activity. Contact details are shared below: Phone: 97172041111 Email: info@rakez.com
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