Freezone review 2020: what are the best freezones in the UAE for online business?
There are around 52 freezones in the UAE and every day you see new promos popping up here and there. But what is the best freezone that covers new trend of online business model?
If you are ready to jump into a trend of launching your own online course, online services, online consultations, you should be equipped with knowledge of which jurisdiction would fit you the most. Should it be freezone or mainland?
First of all, what should be the criteria of choosing the right jurisdiction for you?
1) You need to be sure that the jurisdiction where you plan to setup your company, has the right business activity for you that will cover your business legally.
Example: if you plan to start online course, you need to be sure your license will mention "online education services" or at least "online services". Otherwise, if your license will say "management consultancy" and one of your customers or competitors decide to complain to the authorities about your company - you may find yourself in trouble of facing fines from the the authorities and worst case - your license will be terminated.
2) Check if there are some additional non-reasonable requirements for your activity you picked. You need to have at least 2-3 alternative jurisdictions that have the business activity you are looking for.
Example: Option No.1: Online education services in the emirate of Dubai are available in specific freezone, but in order to have it on the license - you need to rent co-working space which you do not plan to use, in a specific building, at the cost of 10,000 - 15,000 AED a year, which increases your overall cost for company setup.
Option No.2: You have alternative option in one of the Northern Emirates, but that freezone requires additional business plan (additional time and cost to make it if you plan to order it from student-freelancer), and the price for the same activity will be ±5,000 AED higher.
And the Option No.3 - another Northern Emirate where you do not have to rent co-working space, you do not have to provide business plan, and there is no extra fee for this specific business activity.
Summary: obviously Option No.3 will fit you the most, as, having the same activity on a trade license, which will authorize you to conduct your business activity online (so you do not need specific location in a specific freezone), you will have a legal tool to sell your courses online with less expenses and easiest process of company setup.
3) Make sure which one is your best option: freezone or mainland. How? Just reply these questions:
- do I plan to rent the physical office space and to hire more than 6 people in Business Bay / Al Quoz / DownTown / Deira / Malls of Dubai / Barsha?
- do I plan to work with Government authorities and semi-government organizations?
- is my business considering physical distribution of goods B2C?
- does my business activity fall under restricted list of business activities available only in Mainland?
If at least one answer is YES, then you need mainland license.
4) What are the conditions of license renewal next year? You can see many freezones try to attract you with their special offers first year. But quite often the discounts are made at the balance of the second year renewal, where "the discount" amount will be included into renewal price. And, in order to renew your license you might be requested to provide the auditing report (extra 2,000 - 3,000 AED cost to pay to the auditor). Again - keep comparing your options and ask questions about renewal.
5) Visa eligibility and how not to be trapped. The market is full of free visas, second visas for free, free visas for lifetime, etc. But what is right FOR YOU?
Trap No.1: make sure what will be the title on your visa and visa validity. In some jurisdictions you can have Investor visa valid for 3 years, and employment visa valid for 2 years, and there can be conditions where with cheapest package offered at the promo rate you will not be able to have employment visa which you planned to give to your employee unless he becomes a partner with you in your business. So check this more carefully.
Trap No.2: if you live in Dubai, and plan to have visa in one of the jurisdictions in Northern emirates and to sponsor your family - check the requirements for tenancy contract. Some jurisdictions in Northern Emirates require tenancy contracts to be issued only in the same emirate where you plan to take your visa.
Trap No.3: if you plan to sponsor your family members (children / spouse / parents) - check the requirements of family sponsorship, as some emirates have restrictions about women sponsoring their kids, or higher requirements of sponsoring parents, etc.
The above checklist will help you to choose the right jurisdiction for your business and for your visa planning, saving you cost and time.
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Now, having the above checklist in place, still what would be the best freezone for online business activities? You can identify it yourself now :) But some highlights are below:
DUBAI EMIRATE
KIKKLAB is a new freezone in Dubai, which is quite attractive for doing business in Dubai and UAE, covers major part of the most required activities.
Advantages: low cost at the time of setup, flexible visa eligibility packages, co-working space rental available, business activities same as Mainland, dual jurisdiction where you can always switch or get additional Mainland license.
Hurdles: still new, so some operational process might take longer or not available yet.
Best for: newcomers to the market when you need to test your product first you launch it on Mainland, online business / services / consulting companies, small trade operation companies to start; up to 5 visa eligibility.
DMCC freezone not really for online businesses, fits more classic business model with trading activity with office space rent / co-working space, however they have a good choice of business activities where you can find something for yourself.
Advantages: well known freezone with wide range of business activities, prestigious.
Hurdles: expensive, comparing to the other 2 options; paperwork required & company setup process is not straight forward; auditing report for renewal with strict requirements.
Best for: entrepreneurs who wish to have physical location in JLT area second / ongoing year of renewal, trading activity, visa eligibility 3-5 visas first year & further stuff growth with physical office.
In5 Startup Incubator could be a good option for startups to test the water if you have innovative product to offer the market.
Advantages: low cost at the start, location Media City / Internet City / Knowledge Park, networking community for startups, investment opportunities.
Hurdles: your idea must be really unique to be allowed to startup there; you have a limited period to stay in incubator at low cost, after a while you will have to setup a fully fledged company with office.
Best for: Design / Tech / Media startups with maximum 2 visa requirements
NORTHERN EMIRATES
Fujairah Creative City freezone has the least requirement list for online business setup.
Advantages: very easy and straight forward process of company setup, attractive price of the first year, easy to combine various business activities, up to 15 visas available without physical office space
Hurdles: B2C trading should be through the third party
Best for: services, online business, media industries who do not wish to rent physical office space, but plan to hire IT specialists, installing online payment gateway portals for online payments.
RAKEZ: convenient freezone with office in Dubai, so it's easy to approach their services if you live in Dubai.
Advantages: have separate segment of E-Commerce licenses, wide range of activities, attractive offers for first year setup.
Hurdles: not always straight forward company setup process where they might request business plan additionally, extra fee for specific activity; visa eligibility (investor / employer) additional requirements; audit report to be provided for license renewal.
Best for: small business to start, e-commerce, services and consultancy, trading activities.
SHARJAH AND AJMAN freezones offer lots of interesting low cost packages.
Advantage: low price for company setup
Hurdles: difficult to open bank account, hidden costs during renewal and visa applications.
Best for: small business to start with tight budget.