Free zones are often marketed as the perfect solution for entrepreneurs looking for tax benefits and easy business setup. While they do offer advantages, there are some significant drawbacks that many people don’t talk about.
Here are five major limitations you should keep in mind before you decide freezone business setup in Dubai.
1. Limited Access to the Local Market:
One of the biggest restrictions of free zone companies is that they usually cannot do business directly within the local market. If you want to sell your products or services to customers outside the free zone, you may need a local distributor or an additional mainland license. This can add extra costs and complications, especially for retail and service-based businesses.
2. Higher Setup and Renewal Costs:
While free zones advertise low initial costs, the expenses can add up quickly. Many free zones need annual license renewals, office space rentals (even flexi-desks), and visa fees. Some also charge for additional services like document attestation and legal approvals. Over time, these costs may end up being higher than setting up a mainland business.
3. Banking and Financial Challenges:
Opening a business bank account as a free zone company can be difficult. Some banks view free zone businesses as higher risk, making the approval process slower and more complicated. You may also face stricter transaction monitoring, which can be frustrating if you need smooth financial operations.
4. Restrictions on Business Activities:
Not all types of businesses are allowed in free zones. Some industries, like healthcare, education, or certain trading activities, may require special approvals or may not be permitted at all. Before choosing a free zone, make sure your business activity is fully supported to avoid legal issues later.
5. Visa Limitations for Employees:
While free zones offer visa sponsorship, there are often restrictions on the number of visas you can get, depending on your office size and license type. If your business grows, you might need to upgrade your package or rent a larger space just to sponsor more employees, adding unexpected costs.
If you’re unsure whether a free zone is right for you, consider speaking with a business setup advisor who can help you weigh the pros and cons based on your specific needs.
