Free Zone Company (FZCO) – Explained

Sure, Dubai attracts millions of travelers each year – but it’s also become a launchpad for ambitious entrepreneurs and international businesses alike. Apart from its pro-business environment, tax-friendly policies, and strategic location, there’s one more thing that attracts many thousands of international businesspeople and startups.

One big reason? Dubai’s government has created over 40 specialized, innovative free zones to promote investment and business. Free Zone Company (FZCO) structures provide flexibility and ease for establishing a business.

In this article, we’ll break down exactly what an FZCO is, why you should consider setting up an FZCO, the steps to opening your own business in Dubai, and how Creative Zone can make setting up seamless – no stress, no delays.

What is a free zone company in Dubai? (FZCO)

A free zone is a designated economic area offering incentives to businesses – and there are over 40 to choose from. Most free zones are dedicated to a specific industry, such as Dubai Knowledge Park for educational institutions and Dubai Media City for media companies and related service providers.

An FZCO is a type of legal entity formed within a free zone that allows for multiple shareholders (whether individuals or corporations).

FZCOs in these zones can be entirely foreign-owned, which is a major drawcard for international investors and expats alike. Each free zone runs its own rules, overseen by a dedicated authority that handles licensing and operations.

Advantages of setting up a free zone company in Dubai

A free zone offers full ownership of the company, without any restrictions or limitations like needing a local partner or local service agent. This means that business owners can repatriate 100% of their capital and profits to their home country while also enjoying tax benefits, including no taxation on personal earnings and, in many cases, corporate tax exemptions. If you’re trading within or between free zones (or re-exporting goods), your business could benefit from customs duty exemptions.

Setting up in a free zone tends to be quicker and more straightforward than going the mainland or offshore route. It includes access to Dubai’s state-of-the-art infrastructure and business facilities, as well as an excellent location for regional and global trade.

Choosing the right free zone for your business

Choosing the right free zone matters – and with over 40 on offer, there’s something for nearly every business type. Some of the most prominent Dubai free zones include:
Dubai Multi Commodities Centre (DMCC): This centre facilitates trading in commodities, energy, steel, metals, and agricultural commodities.
Dubai International Financial Centre (DIFC): It focuses on financial businesses, the financial services sector, and related industries.
Dubai Airport Free Zone (DAFZ): This is the ideal free zone for businesses in logistics, transportation, aviation, and airport services.
• Dubai Internet City: It is a hub for tech companies, IT firms, and businesses, including Facebook, LinkedIn, Google, and others.
• Dubai International Academic City (DIAC): It is dedicated to higher education, housing prestigious international academic institutions and colleges.
Dubai Media City: It provides a community for freelancers, startups, SMEs, and media industry titans both locally and internationally.

What factors should you consider when choosing a free zone for your business?

First, consider your specific business activity (whether you’re in consulting, logistics, media, fintech, or another sector), as different free zones cater to different industries. Next, consider location: proximity to airports, seaports, or key clients can impact your operational efficiency. The availability and cost of office space are another critical consideration, with options ranging from flexible desks to serviced offices and warehouses. Lastly, be sure to compare licensing fees and annual renewal costs, as these can vary significantly between free zones.

The difference between Free Zone Establishment (FZE) and Free Zone Company (FZCO)

A Free Zone Establishment (FZE) is a company structure for single owners (which can be either an individual or a corporation). In contrast, a Free Zone Company (FZCO) is for multiple owners, ranging from 2 to 50 (which can include individuals, corporations, or a combination of both).

In terms of capital requirements, they differ depending on the specific free zone. For example, you can start an FZCO with a minimum capital share of AED 1,000, while the minimum share capital for an FZE is AED 50,000.

FZCOs boast greater operational flexibility, thanks to their multiple shareholders who can raise capital, form partnerships, and scale operations, while FZEs offer simplicity and control for single owners.

Step-by-step process to register a free zone company in Dubai

To register a free zone company in Dubai, follow these steps:

Choose your business activity and free zone

The first step is to determine your business activity. Every free zone has its own rules and lists of approved business activities – it’s not a one-size-fits-all approach. Once identified, match it with a suitable free zone that licenses it.

Select your company structure

You can decide between an FZE and an FZCO based on the number of shareholders.

Reserve your trade name

Your trade name must comply with the UAE’s strict naming regulations, avoiding terms that are religious or offensive in nature. You can check the availability with the chosen free zone authority.

Submit initial application and documents

An initial approval is permission from the authority that allows you to proceed with setting up your free zone company. For this, you must submit passport copies of all shareholders, the trade name approval certificate, an NOC (if applicable), and the business activities and trade license type.

Pay registration and license fees

Once your documents are submitted, you’ll need to pay the company registration and trade license fees. These fees vary by free zone and office type.

Collect incorporation documents and license

After approval, you can collect your Memorandum of Association (MoA), trade license, share certificate, and lease agreement. You’re nearly there!

Apply for visas and open a corporate bank account

This is your final step: apply for your residency visa, as well as for your employees. You can also open a UAE corporate bank account to facilitate your free zone business’s transactions – and officially begin trading.

Understanding the costs of setting up a free zone company

Let’s break down some of the common costs you’ll need to budget for:
• Registration fee: AED 5,000 – AED 15,000
• License fee: AED 10,000 – AED 25,000 per year
• Office lease: From AED 8,000 (flexi-desk) to AED 50,000 (serviced office)
• Visa fees: AED 3,000 – AED 7,000 per visa

Other costs to keep in mind are mandatory medical tests, Emirates ID processing, insurance, and utility deposits.

Regulatory compliance and taxation in Dubai free zones

Staying on top of compliance isn’t just good practice – it’s the law. You must renew your trade license annually, and that also means renewing your office lease (or taking the opportunity for a package upgrade).

Some free zones require annual accounting and/or audit reports – you can even appoint a firm for this to avoid penalties for missed or late submissions.

In terms of tax compliance, corporate tax only stays at 0% if your income qualifies under the UAE’s latest tax framework – it’s worth double-checking with a business advisor. A 5% VAT applies in most cases; however, transactions involving designated free zones may qualify for special VAT treatment under the rules of the Federal Tax Authority.

How Creative Zone can help with your free zone company setup

With over 15 years of experience helping more than 75,000 companies launch in the UAE, our team at Creative Zone provides expert guidance from choosing the right free zone to final incorporation. Our team offers comprehensive support from day one to help grow your business, including visa assistance, corporate bank account opening, PRO functions and services, office solutions, regulatory compliance, and visa and trade license renewals. We’re your one-stop business support.

Frequently asked questions

What is the minimum capital requirement for a free zone company?

Usually ranges from AED 1,000 to AED 50,000, but depends on the free zone and the nature of the business.

Can I sell my free zone company?

Yes, you can sell or transfer ownership, subject to approval from the free zone authority.

Can a free zone company do business in mainland Dubai?

Only through a local distributor or after opening a mainland branch or subsidiary.

What is the difference between FZE and FZCO?

An FZE has one shareholder, while an FZCO allows for multiple shareholders.

About Creative Zone

Creative Zone is a leading business setup advisory firm offering end-to-end services for business setup in Dubai.

From helping entrepreneurs launch Free Zone Company (FZCO) structures to navigating compliance, visas, and growth strategy, Creative Zone supports your success from day one. Contact our highly experienced team to get started today.

Get in touch

Recent Posts

Get in touch