JAFZA is one of the most popular free trade zones in Dubai for foreign investors. It also has its own laws and regulations, but most of them are consistent with the federal laws of the UAE.

I. Main regulatory provisions for foreign investors investing in UAE free zones

(I) Regulations on foreign investment restrictions in UAE free zones

　　JAFZA follows a list of business activities published by the Dubai Economic Department, which lists the specific industries that foreign investors can engage in within the free zone, covering common economic activities in the fields of trade, industry, services, agriculture, etc. (The list can be found at the websitehttps://www.jafza.ae/resources/guides/business-activity-list-for-businesses-at-jafza/)。

In addition, JAFZA specifically requires that offshore companies established in free zones shall not engage in the following activities:

(1) directly conduct any business activities in the UAE;

(2) enjoy a lease of real estate located in the UAE;

(3) conduct banking business;

(4) conduct any insurance or reinsurance, insurance agency or insurance broker type of business; or

(5) other businesses that may be prohibited from time to time.

(II) Provisions on foreign ownership of land and houses in the UAE Free Zone

For the purposes of JAFZA, only offshore companies can own real estate in Dubai or designated freehold areas in the UAE. According to Articles 31.2 and 14.2 of the JAFZA Offshore Companies Regulations 2018, offshore companies registered in JAFZA can purchase real estate in Dubai or hold real estate in designated UAE areas if they meet the conditions.

(III) Foreign exchange regulations in the UAE free zones

The UAE implements an open monetary policy and a friendly foreign exchange management system, and its common currency is the Dirham (AED). The UAE does not implement foreign exchange controls, and foreign exchange can be freely remitted in and out under the premise of complying with the UAE government's anti-money laundering regulations. Foreign exchange circulation in free trade zones such as JAFZA is also relatively free and unrestricted.

2. The main legal forms of investment in Dubai JAFZA Free Zone

According to the JAFZA Companies Implementing Regulation 2016 (hereinafter referred to as the "JAFZA Companies Implementing Regulation 2016") and the officially released JAFZA Investor Guide, JAFZA does not set corporate tax or income tax, and allows all capital to flow back to the country. JAFZA allows foreign investors to adopt the following legal entity forms:

1. Branch

A branch is registered and established by a local or foreign company (whether established in JAFZA or not) and is considered an integral part of the parent company and is 100% owned by the parent company. The branch must be registered and operated under the same name as the parent company and conduct business within the scope of the parent company's business. The branch is not considered an independent legal entity, so there is no minimum registered capital requirement. The branch must obtain a license before conducting business in JAFZA.

2. Free Zone Establishment (FZE)

FZE is essentially a limited liability company established in a free trade zone, so the liabilities that the shareholders of the FZE need to bear for the company are limited to the paid-in registered capital. FZE can be composed of 1 natural person or corporate entity as a shareholder, and requires at least one director, manager and secretary. In addition, depending on the type of business to be engaged in, the FZE must have a registered capital sufficient to enable it to carry out the business activities under the license.

3. Free Zone Company (FZCo)

Like FZE, FZCo is also a limited liability company in a free trade zone. Therefore, the liabilities that the shareholders of FZE need to bear for the company are limited to the paid-in registered capital, and must have a registered capital sufficient to enable it to carry out the business activities under the license. However, unlike FZE, FZCo consists of 2-50 natural persons or corporate shareholders and requires at least one director, manager and secretary.

4. Public Listed Company (PLC)

PLC is a company listed on the stock exchange in accordance with relevant laws, and anyone can subscribe to its shares. PLC consists of two or more shareholders and requires at least two directors, one manager and secretary. At least one of the directors should be a natural person, and the secretary cannot be a director. PLC is a limited liability company in a free trade zone with independent legal status. Its registered capital should be higher than the amount required to carry out business activities under the license or the registered capital stipulated in the Market Law.

5. Offshore Company

An offshore company is a special legal entity established in a specific free zone. Unlike other free zone entity types, an offshore company is established for the purpose of operating outside its registered jurisdiction and/or its location. Therefore, the registration process of an offshore company is simple, there is usually no audit requirement, and the directors, financial and other information of the offshore company are kept confidential. However, not all free trade zones allow the establishment of offshore companies. Currently, only a few free zones such as JAFZA and Ras Al Khaimah International Corporate Centre provide foreign investors with the convenience of establishing offshore companies.

Take JAFZA as an example. To establish an offshore company in JAFZA, at least one natural person or corporate entity is required as a shareholder, and there is no upper limit on the number of shareholders. An offshore company is essentially a limited liability partnership in a free zone, and the company's liability is limited to its paid-in capital. However, since an offshore company is not established for the purpose of actual operation in the local area, an offshore company can open a bank account normally, but cannot apply for a residence visa for its employees.

3. Main investment paths for UAE free zone investments

1. New Entity

According to the JAFZA Investor Guide, the cost of registering a business in JAFZA ranges from AED 5,000 to AED 15,000. The steps to register a business are as follows:

(1) Decide on the legal form of the new entity. As mentioned above, JAFZA provides foreign investors with a variety of legal forms, including branches, free zone wholly owned companies (FZEs), free zone companies (FZCos), etc. Foreign investors can decide on the appropriate legal form based on their own business arrangements and investment plans.

(2) Determine the business scope of the new entity. JAFZA divides the types of business activities carried out by enterprises into three main areas: trading, service, and industrial. The types of business activities that enterprises intend to engage in are different, and the licenses required are also different. All newly registered enterprises in JAFZA must obtain the corresponding licenses before they can start actual operations. The types of licenses provided by JAFZA to enterprises include Trading License, General Trading License, Service License, Industrial License, National Industrial License, Logistics License and E-Commerce license.

(3) Submit an application for registration of a newly established entity. The registration application is generally submitted online. After the applicant submits the registration application and related documents through the registered email address, JAFZA will review the name, scope of business activities, etc. of the newly established entity.

(4) Determine the office address of the newly established entity and complete the registration of the newly established entity. Investors need to select a site facility (specifically land, warehouse, exhibition hall, office, etc.); pay rent, registration fee, license fee and procedural fee; and sign relevant documents such as the company's organizational outline and articles of association. After completing this stage, investors can obtain a shareholder register, company organizational outline and articles of association, certificate of incorporation, a copy of the license and a bank letter for the purpose of opening a bank account.

(5) Obtain the JAFZA service access key. After the registration and establishment of the newly established entity is completed, JAFZA will hand over the access key (product key) to the investor, which can be used to activate his personal account on the Dubai Trade Online Portal and use all the online services of the website.

According to the JAFZA Guidebook (Version 1.0, November 2023) and other documents, the materials required for the establishment of a new enterprise in JAFZA usually include:

(1) JAFZA company registration application;

(2) Environmental Health and Safety (EHS) application;

(3) Copies of passports or local ID cards of shareholders (if individuals), directors, managers and secretaries;

(4) Summary of the investment project;

(5) Know Your Customer - Ultimate Beneficial Owner Form (KYC-UBO).

Among the above materials, it is the Ultimate Beneficial Owner Form that needs to be paid attention to. JAFZA requires investors to disclose information about the ultimate beneficial owner to improve the transparency of entities registered in the UAE. The ultimate beneficiary mainly refers to the ultimate beneficial owner of the newly established entity, including the following natural persons or entities: ① holding at least 25% of the registered capital of the newly established entity; ② having at least 25% of the voting rights of the registered capital of the newly established entity at the shareholders' meeting; or ③ obtaining at least 25% of the registered capital of the newly established entity as a beneficiary.

In addition to the above materials, if a foreign company plans to establish a branch, a free zone wholly-owned company (FZE) or a free zone company (FZCo), it is also necessary to provide its own company registration certificate and good standing documents, organizational outline (MOA) and articles of association (AoA), as well as the resolution of the company's competent authority on the establishment of a new entity in JAFZA, the allocation of share capital, the appointment of directors, managers, secretaries and legal representatives (as the case may be) and authorization. In addition, the above documents should be notarized and authenticated by the UAE Embassy.

2. Equity acquisition in JAFZA

According to Article 23 of the Jebel Ali Free Zone Companies Implementing Regulations 2016 (hereinafter referred to as the "Company Implementing Regulations"), any equity transfer of a free zone sole proprietorship (FZE) and a free zone company (FZCo) shall be filled in the form provided by the JAFZA Registrar and submitted to the Registrar for approval. After approving the equity transfer, the Registrar shall register the equity transfer at the Companies Register. This equity transfer shall take effect on the date of completion of the registration at the Companies Register.

According to the form provided by JAFZA, the information that needs to be provided to the Registrar for equity acquisition includes the name of the target company, license number, registration number, name and address of the transferor and transferee, number of shares to be transferred and transfer consideration. At the same time, in order to complete the equity acquisition, a certain amount of transaction fees must be paid to the JAFZA registration authority.