By Bahareh Alizadeh & Axel Jacob

UAE Free Zones Are Moving In The Right Direction To Attract More Businesses.
Having been engaged in numerous company establishment and re-structuring assignments within the UAE, Fichte & Co have witnessed a significant down turn at the beginning of the financial crisis in new requests for the implementation of business projects in the UAE from our international clients. However, these days the demand has risen to a decent level again and the same may have been helped by the various free zones in the UAE, coming up with a number of strategies and ideas to be more attractive for new clients. At the same time the Economic Department in Dubai has done well in order to make a local setup outside the free zones more attractive for foreign businesses. We have picked a few particular free zones to demonstrate the trend.

Dubai Silicon Oasis
Silicon Oasis Free Zone Authority (DSOA) has offered their office space at reduced and a very reasonable rates including one month rent for free. Originally designed to become the Middle East’s “Silicon Valley” in an attempt to attract the semiconductor industry, they have realized that the current demand is the only important factor in business and have widened the scope of activities licensable. They are now offering all sorts of commercial and service licenses.  Very recently DSOA has announced that they have reduced the minimum capital requirement for new companies setting up within their jurisdiction. Whilst the requirement used to be AED 1,000,000/- for Free Zone Establishments and AED 500,000/- for Free Zone Companies respectively, it is now AED 100,000/- for both.
Hamriyah Free Zone
The Hamriyah Free Zone Authority (Sharjah) has gone one step further and fully abandoned the minimum capital requirement for new companies. A new company established in Hamriyah Free Zone can announce the total amount of the company set up fees payable to the Free Zone Authority as the start up capital. In this case the company is no longer required to submit a capital letter from a bank to the Free Zone in order to receive the company license. This move makes the setting up procedure considerably faster as the opening of a bank account is not a requirement for the set up anymore. On the other hand the licensed company can open a bank account immediately with no need to wait for further formalization of its license.  Competitive rates and set up packages along with a wide range of allowed activities have made Hamriyah Free Zone a jurisdiction well sought after these days.
Fujairah Free Zone – VirtuZone
Fujairah Free Zone Authority has perhaps made the boldest move by establishing and introducing VirtuZone. VirtuZone is part of the Fujairah Free Zone and as such is run by the rules and regulation of Fujairah Free Zone Authority. The VirtuZone main office however is located near JBR in Dubai Marina and is offering very attractive packages and opportunities especially for small businesses or those companies entering the UAE for the first time.  The newly arisen demand for company set ups within the UAE illustrates that VirtuZone may well become a great success as on paper they have managed to put together all that a potential investor needs, with no ballast and at a very reasonable price: a free zone company license, no need for a physical office and no minimum capital requirements and hopefully soon all amenities of modern business centre services such as dedicated telephone and fax lines. Perhaps even more important is the generous offer of up to five visas for a company applying for the virtual office scheme. This is quite extraordinary, as usually in any UAE Free Zone the number of visa available for a company is directly equivalent to the size of the office leased, usually at a rate of about 1 visa per each 12 sqm of office space rented, which meant that normally for a virtual office scheme, be it a Flexi Desk or similar, only one or maximum two visa would be available. All this shall be completed within a maximum of ten days including the obtaining of visas.
Sharjah Airport Free Zone
Sharjah Airport Free Zone (SAIF) is currently offering the Business Desk Scheme according to which a company can avail of a dedicated desk instead of an office for an annual lease rate as small as AED 15,000. SAIF Zone also remains the only free zone until today which offers a real estate investment license, allowing owners to buy, hold and sell real estate within the UAE as a principal investment.
Ras Al Khaimah Free Trade Zone
Perhaps against the trend the Ras Al Khaimah Free Trade Zone Authority (RAKFTZ) has tightened its regulatory grip on business setups in the RAKFTZ and has currently stopped accepting new clients for the previously very successful flexi desk and flexi office schemes. It is an attempt to streamlining its clientele, to lure more physical investments into the Emirate and to shake off its reputation as a letterbox company heaven. Whether it will work out remains to be seen. Its business centre services and facilities - in any case - range amongst the very best in the country and that may be worth accepting the additional costs of taking a physical office in Ras Al Khaimah.
Dubai Economic Departments
Outside the Free Zones since some time businesses may setup with no minimum capital requirements, effectively making the setup process a lot faster. Dubai Economic Development (DED) had also announced that Dubai Free Zone based companies may now set up branch offices in Dubai mainland, effectively opening the doors to free zone companies to be present where they need to be and to get much closer to direct trading in the UAE market. Again Dubai is placing itself at the forefront of innovation and reformation pushing the boundaries and limitations of the Federal Commercial Companies Law further than ever before, at the same time of course promoting its own free zones by effectively leaving companies of free zones in other Emirates outside the scope of this new option.
We would expect that the Economic Departments in other Emirates will follow with similar rules at some point. Since a change in the local sponsorship rules is expected soon and may even be implemented this year allowing for majority or total foreign ownership of local LLC companies outside the free zones, this would seem only consequent. Once that rule is out, the free zones will have to focus much more on their role as industry cluster and service provider, if they want to survive since then a surge in local registration can be expected. We are of course a bit skeptical as to whether we really will see a lift of the local sponsorship requirement soon or to what extent the same will happen – too often has it been announced in the past, alas we are still waiting.