Free zone company bank account opening can be difficult, very difficult – especially overseas. We’ll discuss the reasons why free zone companies struggle to establish new banking relationships abroad and share what you can do as a business owner to improve your chances.
But, one key point to remember is that without a physical operating presence (and economic substance), many banks view free zone companies as basic shell companies and label them as high-risk.
That said, free zone companies are plagued by another problem as well: lack of familiarity. If a banker does not recognize the structure of your company (or isn’t familiar with it), they’ll think it’s too exotic (or risky) to onboard.
We’ll discuss these and other considerations below to help you start opening accounts as soon as possible.
Of course, feel free to use the table of contents to jump ahead to the sections that are most relevant to you.
Table of Contents
- Free Zone Business Bank Account
- Bank Account Opening Challenges
- Open Company Bank Account
- Start Opening Accounts
Free Zone Business Bank Account
Most people view free zone companies as an easy solution to their international business requirements. In many ways, they can be. Not dissimilar from other quick corporate registration options, free zone companies often come with the promise of low taxes and easy banking.
But, it’s important to question how much of that promise is hype and to consider the challenges of using and operating the company before registering as well. In particular, free zone companies face challenges in opening bank accounts, sending transactions abroad, and even processing payments.
Some of the challenges that free zone companies face with banking mirror those that you would experience if you buy an offshore company with a bank account. Other challenges are unique to the specific free zone where you choose to incorporate your company.
Let’s take a look at the challenges now…
Bank Account Opening Challenges
Physical Business Activities
Many business owners decide to incorporate in one of the UAE’s free zones. But then, they never actually visit the free zone, don’t have an office, don’t get residency there, and don’t operate the business from there. This isn’t necessarily a bad thing, but in combination with the other variables mentioned below, it makes account opening significantly more challenging.
Perceived Tax Optimization
The international banking community has increased awareness of UAE free zone companies as tax-optimized structures. And, when it comes to opening bank accounts, companies that are registered for the sole purpose of tax optimization are often viewed negatively.
Of course, there are many legitimate reasons why someone might have a UAE-free zone company. But, if your company doesn’t have any physical operations or economic substance (as mentioned above) and is perceived as being structured solely for taxes, banks are less likely to onboard.
Familiarity With Your Chosen Free Zone
UAE free zones have been around for a long time, starting with the Jebel Ali Free Zone (founded in 1985). Since then, many more free zones have been established in the UAE and continue to be established. In fact, in mid-2022 the latest UAE free zone was established aboard the QE2 Hotel (literally a Free Zone within a floating hotel), focusing on supporting young entrepreneurs.
That said, international and offshore banks are not always familiar with all of the free zone structures available in the UAE. So, if you choose an option that is brand new, lesser known, or that rarely opens accounts offshore, you will most likely face challenges opening accounts abroad.
Open Company Bank Account
UAE Free Zone Company Bank Account
Generally speaking, there are international and offshore account opening options available for free zone companies. However, you should choose banks that are familiar with them and deal with these companies on a regular basis.
Dubai Free Zone Bank Account
If you are looking to open a bank account for a Dubai Free Zone Company, such as DMCC, DAFZ, DUQE, or others, you should look for local account opening options that can support your business needs first. However, it’s worth noting that this is often difficult if you do not have a local presence. After establishing a local account you can seek international accounts to support payments for international contractors, vendors, etc. Some entrepreneurs will also try opening accounts with fintech abroad, if they are rejected by traditional banks.
Start Opening Accounts
If you have a free zone company and you’re struggling to open accounts, you can access GlobalBanks Insider and start the process of navigating your options in just a few clicks.
GlobalBanks Insider is a dedicated account opening solution that involves direct support from our team and direct introductions to the banks of your choosing. It gives you instant access to the…
+ Direct support from a team of banking experts
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+ Plus, FULL access to our entire suite of account opening tools and intelligence!
And “yes!” GlobalBanks Insider is designed to help foreign and non-resident individuals and companies open bank accounts.
You can learn more on the Products page on our website.