While many people think of Dubai as the only place in the United Arab Emirates to start a company, there are actually free zone areas throughout the region that offer outstanding growth opportunities with favorable options for foreign investors.
RAK or Ras Al Khaimah is one of the emirates that is considered to be a hotspot for new companies into the area. It boasts a very stable government, which is always a factor for a business to consider, plus it is an area that is very interested in bringing in new revenue streams and developing their business and tourism industry.
Forming a company in RAK is an attractive option for many foreign investors. Investors from other countries will find that RAK is eager to work together to increase the number of offshore companies. Keep in mind, throughout the UAE; each emirate will have their own registration jurisdiction as well as control over their free zones. As information about the various free zones in any of the Emirates can change frequently, it will be essential to work with a legal team that is familiar with starting a business in RAK and with the current regulations and requirements.
Free Zone Options
For foreign investors, opening a business in RAK will be restricted to the free zones if the investor wants to remain a 100% owner of the company and the activities of the company.
It is also critical to understand that free zones are not incorporated into other areas, but are individual entities that are controlled by the free zone authority. Each free zone is set up to cater to specific industries.
For example, there the RAK free trade zone is actually divided into four different sections. There are two different locations that are designated as an industrial park, a business park, and a technical park. These different areas of the free trade zone will have different restrictions as to the types of businesses that can operate.
It will be critical, to understand the advantages to one area or section of the free zone over the other. For example, the industrial park at Khor Khwair is near Saqr Port, which may be an important consideration for imports and exports of raw and finished materials. Additionally, the business park is in the Al Nakheel area while the technology park is closer to the RAK International Airport, which may be worthy of consideration if your technology business includes meetings with clients or the ability to have access to air transportation for cargo and packages.
In addition to the RAK Free Trade Zone, designated RAKFRZ, there is also the RAK Investment Authority Free Zone, which is designated as RAKIA FZ. Other free zone areas include the Academy Zone, which is for education and academic related businesses and educational institutes as well as the Media Free Zone.
More free zones areas are planned for RAK, with considerations for a business training center, financial center and an industrial and technology park outside of the ones established in the RAKFTZ.
The other option for a foreign investor is to enter into a partnership or a service agent agreement with a national. This is a lengthier process with the need to have a formal agreement with the national as the sponsorship that is approved by the court.
While this does provide freedom to establish the business outside of the designated free zones, it also eliminates some of the benefits that are found in the free zone areas. The other issue to consider is the ability to do business locally. Free zone businesses cannot sell directly in the country unless through a registered agent. For service companies, there are no restrictions for free zone companies and no need to enter into to sponsor agreements with nationals to offer domestic services.
If you are setting up a company in RAK, be aware that you may not be able to sell into other Emirates. This is a common practice with government contracts or sales here the local government will choose to do business with a local company, which has the 51% ownership by a national.
Obtaining a Visa
Across the UAE, efforts have been made to streamline the visa application process for foreign investors. It is a very simple process where the applicant provides identification and information that allows the authorities to determine if residency will be granted.
It is will also be necessary to complete a medical test. This can be done in the country of residence, but it must include the specific requirements. The form is provided with the application for the medical professional to complete.
Company Composition and Banking
In the RAKFTZ it is relatively easy to set up the company. This is a free trade zone that is working very diligently to bring in companies, so they are open to small businesses with just one director and one shareholder. There is no requirement for these two individuals to be from the same country.
The application for the business is simple and can be completed relatively quickly. However, there are specific choices that have to be made on the application that can limit your business activities in the future. As this process can be more complex that what someone unfamiliar with the RAKFTZ regulations may realize; it is important to talk to an attorney or advisor with experience in business formation in RAK.
Within the free zone, there are several different legal entities. This includes the sole owner, which is a free zone limited liability establishment, or when up to five stakeholders are involved, it will be designated as a limited liability company. There are separate designations for non-free zone businesses (where a national owns 51% or more of the business) as well as the option to open branches.
During the registration process, the application will also require a bank reference letter. This is required to show to the RAKFTZ Authorities that the business is operating with the necessary capital and with financial banking to be able to do business.
Setting Up An Office
For those companies setting up a business outside of the free zone, office space or a physical address will simply be the place where you do business. However, in the free zones, it is essential to have office space before you can obtain a business license.
The good news is that the free zones have office space for rent. The office space is managed by providing on average, 10 square meters for each visa. However, not all office space would be able to accommodate larger companies with multiple visa holders. For this reason, many companies start up with a limited number of visa holders, making it easier to find office space and get started with the process.
These rental spaces are much different than “western” style offices, particularly for those companies starting out with a limited budget. They incorporate shared workstations and open room configurations that allow for maximum flexibility to suit a wide range of business needs.
However, it is important to realize that these office spaces offer all the features a business owner will need. There will be internet and phone system in place that is state-of-the-art. They will also provide business centers and secretarial services within the same facility, allowing even a small company with one or two employees to operate like an established business.
The benefits of opening a business in RAK are many, including customs duty exemption on international trade, 100% repatriation of profits and capital, a thriving economy and will to work with foreign-owned companies in a business-friendly environment. Contact STA Law Firm for more information.