These days technologies play an important role in our lives. They have become an integral part of many business processes as well, and today even small businesses resort to such technological solutions as CRM systems, online marketing platforms and planners. No wonder that society understands the growing role of information technologies and more often people decide to establish their own IT companies. In this chapter we will look at such aspects, as to how to determine, whether you need a local company or a free zone entity for your IT business; which free zone you choose, if you decide to proceed with a free zone entity registration; what would be the most suitable license and which activities you may want to include on your business license.
Additionally, we will review the most-cost effective set-up solutions for your IT needs. When we say “IT”, we talk about information technologies in a very broad sense. So, when you decide to establish an IT company, it is also extremely important to understand the exact IT niche you will be working in. Generally speaking, IT industry can be divided into three main sectors: IT Consulting, IT Services and IT products trading. While IT Consulting aims at providing advice, IT Services involves providing services, IT products trading is linked to IT products supply, such as software, software keys and other IT-related products, that can be supplied both online and offline.
Before you proceed with business registration process, first you have to ask yourself a number of test questions, the main being what service or product you are going to provide and the second being, whether you will need to deliver service or products to clients outside of your office premises. For example, you want to design web-sites and provide clients with IT support, where you will be coming a set number of times each month to client’s office to check that the office IT infrastructure performs well. As such, in both cases you will be providing service, but web-design you will do on your computer (at your office or at home, if you have a flexi-desk) and to provide IT support you will need to see your clients at their offices.
As soon as you decide to provide service outside of your office and visit clients, you need a local/mainland company. However, if to render the service you can stay in your office, free zone company will be sufficient. In the example we just gave with the web-design and IT support, IT support will be provided at clients’ premises. And though web-design can be done from your office or home, to provide IT support you will need to leave the office and visit clients in different parts of town.
Therefore, in our example a local company would be required. Same applies, if you do web-design and at the same time sell software. If the software you sell can be downloaded from you web-site and you give video instructions on your web-site, how to install it, you perform the service from your office.
Since both services are performed from your office, you can register a free zone company. However, if your software is being sold on CD-disks and you need to come to clients’ offices to install programs, you right away require a local company. To summarize, here is the first test you need to pass: you list all IT services and IT products you are going to provide and then ask a question, whether all of them can be provided from your office, just through the work on your laptop, or you will need to visit clients to perform work. In case at least one of the services or products requires your presence at clients’ premises, again you require a local company.
Now that the company type is determined, you will next need to choose your license type and business activities for your license. As such, here you need to ask yourself the following question: whether you will be selling or providing service and what is that exactly that you will do? In the event you will be running a web-site or a platform, which will sell online various software, you will better opt for a commercial license or e-commerce license, if the latter is available.
If you plan to render services, you will require a service license instead. Business activities you shall include on your license will largely depend on the registration authority you will be incorporating your company with.
At the moment all Dubai-based registration authorities share the same list of business activities for companies, with the only difference that not all activities are allowed in free zones. As you have already learnt, local company set-up requires from you more investments than a free zone company. So, if you have a choice; for example, you offer all IT-related services from your office; you can opt for free zone set-up to cut down on operational costs. The main struggle every entrepreneur experience here is how to choose the right free zone.
If you would be based in Dubai, the first free zone that would come up to your mind would be Dubai Internet City, where major international IT brands have their offices, or Dubai Silicon Oasis, a Dubai Silicon Valley. Sure, you will be surprised to learn that also other major free zones in Dubai can offer you to set-up an IT company, such as Dubai South and DMCC free zones.
Additionally, almost all free zones in the Northern Emirates offer IT business activities for your license. Fujairah and Sharjah even created media clusters, Fujairah Creative City and Sharjah Media City, where an abundance of IT business activities can be found. Free zone authorities understand the role of technology and encourage the set-up of IT businesses. You will see it very well, when you learn that with a minimum set-up costs of up to AED 30,000 – AED 35,000 a year in Fujairah Creative City, you can have up to a 6-visa quota. This is particularly important for IT teams, where several IT professionals with different backgrounds come together to start their business adventure. As such, in terms of free zones you have a number of options: to be based in Dubai or in a northern emirate.
If you are looking to cut down on operational costs, have a closer look at Fujairah Creative City. But you shall be also aware that once you start growing, you will not be able to transfer your company from Fujairah to Dubai, so you will have to liquidate a company in Fujairah or, another option, to sell it, and then start a new entity in Dubai. As we said already, Dubai registration authorities share a common business activity list, whereas, free zones in the Northern Emirates maintain their own. There you will find such activities, as online marketing services, web design, media services and much more. They are very specific. But it does not mean, that, if there are no online marketing services on Dubai list, you cannot offer these services.
In Dubai much, broader terms are usually used, therefore, your activity may simply fall under a more general term. We always recommend to discuss your plans with the free zone, where you wish to start your business, and you will be definitely advised on the type of activity suiting your business need. Now you know, which steps to take before you register your IT company: determine your services and products, do the test “from office or at clients’ premises”, in case of a free zone company, have a look at several free zones, as you may find Sharjah Media City (SHAMS) or Fujairah Creative City more affordable in terms of set-up costs. Additionally, there is a very competitive 1 visa package offered now by Umm Al Quwain Free Zone. You may also want to check that out. And finally, do not put too much focus on the name of the business activity and consult relevant registration authority regarding the same. You may learn that you can opt for a more generic business activity, such as IT services or alike.
If you want to know more about Dubai freezone company formation, feel free to get in touch with our professional consultant team and we would be delighted to assist you and help you to compare Dubai freezone company setup costs and help you to find that free zone, which would suit your business needs the most.
Disclaimer: Business Boutique UAE-Consultants.com is not affiliated with any particular government or legal entity. Business Boutique does not give professional legal advice nor any other professional advice subject to a public office in the government. This article merely sets out a simple and basic idea as to the reasons of Dubai freezone company setup and Dubai free zone company formation cost. Business Boutique in no way holds nor imposes any official governmental or legal authority and the article herein is only to be taken as a guide. All further governmental or legal issues should be addressed to the corresponding authorities.
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