From Dubai To The World
International expansion via Free Zone IFZA
From Dubai to the world: the metropolis on the Persian Gulf has developed into an international business hub. Companies from all over the world are driving their business in the Middle East or handling intercontinental trade through local subsidiaries. This article shows how it works to set up in Dubai and what entrepreneurs or executives should pay attention to.
After landing and successful immigration, a driver holding the sign “IFZA” already waits in front of the terminal of Dubai International Airport (DXB). In the oppressive heat, he politely loads the luggage, opens the pleasantly air-conditioned van and sets off on a 20-minute ride. Passing the Creek harbor area with its traditional Arabian wooden ships, we take the highway to Silicon Oasis Park. An industrial area as you know it elsewhere in Dubai: office buildings, hotels, restaurants – and two office towers with glittering façades. Welcome to IFZA – one of more than 20 free zones in Dubai.
All-round support for start-ups
Founded in August 2018 and thus one of the youngest free trade zones in the United Arab Emirates (UAE), IFZA has recorded dynamic growth in recent years and registered more than 25,000 companies. The vast majority of those behind it are investors from German-speaking countries, the United Kingdom and Spain. For them, there is an all-round support from IFZA employees who take care of everything that is necessary for the establishment and development of business activities in Dubai. “This starts with applying for the necessary licenses and organizing a visa including a medical check for the local managing director and his family to renting office space,” explains Ahmed Shalaby, who is responsible for the DACH region for IFZA as Head of Business Development.
Free Zone Company as a legal form
If a foreign company wants to do business in Dubai, there is a choice of a subsidiary or a branch. Since the latter is considered by the local tax authorities as an independent legal entity, it does not offer any real advantage. “In 80% of cases, investors decide to set up a corporation in the form of a Free Zone Company, also known as FZCO. This corresponds to a GmbH or Private Limited and is the counterpart to the Mainland LLC outside the Freezone,” says Jessica Meyer, Senior Executive Business Relations at IFZA. With the legal form of a FZCO, it is easier to open a company account.
Founding period depends on industry
In order to set up an FZCO, one first needs a license which is in place typically within three to five days. Thereafter, industry-specific permits must be obtained; this requires the usual documents such as notarized excerpts from the commercial register, articles of association and an incorporation resolution of the investor. With regard to Germany, the Federal Office of Foreign Affairs and also the UAE embassy should be involved. This can take four to six weeks and depends on the business activity. “We received green lights from the Sports Authority for a new start-up in the fields of sports management within one day. In terms of crypto trading, on the other hand, this can take half a year,” reports Luna Yusuf, tax expert at IFZA.
Three roles to fill
The license at the beginning does not yet require a personal presence in Dubai. Only for the application for the visa, including a medical check for tuberculosis and HIV and the application for the Emirates ID, does the designated managing director have to travel to Dubai. At the same time, it must be decided which roles he or she performs: each FZCO or LLC has a manager, a director and a secretary. “All three roles are to be filled and can also be played by the same person. From a tax point of view, it is advantageous if at least the manager is based in Dubai – so that the FZCO has enough substance from the point of view of the foreign tax authorities,” says Luna Yusuf.
Quick account opening
In order to set up the company, it is not mandatory to actually pay in a minimum capital. Nevertheless, the share capital of a FZCO amounts to AED 10,000 and the shareholder is liable up to this amount. “We therefore recommend that at least this amount, but ideally AED 100,000, be paid in initially and booked as paid-up share capital. This also makes it easier for foreign exchange and for opening an account,” explains Jessica Meyer. Opening a bank account is faster in Dubai than anywhere else. IFZA works with various banks. Some only need a few days to open the bank account. In Dubai, too, the KYC process must be completed and the beneficial owner clarified – which can take a few weeks in the case of more complex structures. In any case, it is necessary that the manager of the start-up has the aforementioned Emirates ID.
Tax rates, exemption limit and allowance attractive
Once the company is founded, it does not have to rent office space or hire employees immediately; This can also be done later. What is required, however, are tax returns. “Until the end of 2026, there is an exemption limit of AED 3 million in annual turnover, which is about EUR 750,000. Companies can be exempt from tax up to this amount. At the same time, there is an allowance of AED 375,000 in annual profits, which is about EUR 80,000. Corporate income tax of 9% is only payable from this amount,” explains Luna Yusuf. For companies with an annual turnover of at least EUR 750 million, the global minimum tax of 15% applies.
The cost of incorporation depends on the scope of services and the time frame for the license. Upgrades for health insurance, a fully furnished office, car rental and assistance in finding a school in the event of a family move can be booked at an additional cost.
Fewer restrictions, more cooperations
With regard to the industries possible for a FZCO, there are practically no restrictions. “The government is only strict on oil and gas, real estate and strategic raw materials. Such activities can only be established in Mainland with an LLC and require lengthy approval processes,” says Ahmed Shalaby. In addition, brokerage activities and crypto trading are limited. IFZA is particularly suitable for trade, services – and in the future also for production, which is being worked on. In addition, cooperation with the airport in Abu Dhabi and free trade agreements with various countries (including the USA, Canada, India) will make it possible for companies from some countries to export via an FZCO in Dubai without major restrictions – which could be strategically interesting in view of the geopolitical changes. For companies from the European Union – especially from Germany, Austria and Switzerland – IFZA is advantageous to use Dubai as a hub to the world due to the German-speaking support provided by local experts.
