30th August 2019
Entrepreneurs are always looking for the cheapest license to be provide their service legally, but is a freelancer permit the most suitable?
It is a waste of money investing in a license purely for the sake of having one. If a license doesn't cover you for the services you are providing, in the correct jurisdiction, then it isn't worth having. Sadly we encounter this scenario regularly - people looking for and opting for the cheapest option available. In my opinion, you might as well not both spending the money because its the equivalent to not having a license at all.
So the purpose of this article is to share information about the freelancer permits (freelancer licenses) to help you decide if this is the right option for you. If it is - that is great news - go and get one and offer your services legally. If it isn't, there are plenty of other options available and Gateway Group can help you to identify which is the most suitable for your circumstances. We also have plenty of other articles about various license types, such as the Tajer Abu Dhabi license which is ideal for UAE residents looking to set up a side hustle or for sponsored spouses to set up a business from home.
What is a freelancer?
A freelancer is an individual which provides their specialist service on an adhoc basis, like a consultant. They are not an employee of an organisation. They are not running a company. It is simply that individual and their specialist skill. A 'one man band'.
According to the Oxford Learners Dictionary, the definition of a 'Freelancer' is: A person who works freelance. Whilst their definition of 'Freelance'is: by selling your work or services to several different organizations rather than being employed by one particular organization.
To do any kind of work in the UAE it is necessary to have the correct permit or license. For example, if you are an employee in an organisation they will provide a work permit and labour card permitting you to work for that particular organisation. If you are self-employed, you then need to determine whether you need a business license (trade license) or a freelancer permit to be able to provide your services legally.
What jurisdictions in the UAE offer freelancer permits?
- Twofour54 (Abu Dhabi)
- Dubai Media City
- Dubai Knowledge Park
- Dubai Internet City
- Dubai Studio City
- Dubai Production City
- Dubai Design District
- Dubai Creative Cluster Authority
- D-TEC at Dubai Silicon Oasis
- Dubai Development Authority
- Ras Al Khaimah Economic Free Zone Authority
- Fujairah Creative City
- Ajman Free Zone
Can a freelancer work with onshore companies?
An onshore or mainland company can engage a freelancer if the freelancer is carrying out the work within the free zone area of the issuing authority. However, specific terms and conditions should be checked with each license issuing authority to ensure that you will be complaint and working legally.
What designations are freelancer permits available for?
Freelancer permits are available for individuals working in media, education and tech.
Media designations include:
- Social media influencers
- Audio visual engineers
- Marketing and PR specialists
Education designations include:
- Executive Coaches
- Education and e-learning advisers
Tech designations include:
- Software development
- Website development
Is a lease required with a freelancer permit?
No. However, the issuing authority will likely be able to offer a flexi-desk or some kind of working environment for an extra fee, if required.
Bank Accounts and financials for freelancers
The most common questions asked in relation to bank accounts and freelancer licenses are:
- Do I need a special bank account? A freelancer will be using their personal account for expenses and receiving funds.
- Can I get a corporate bank account? A freelancer permit is issued to an individual and not in the name of a company therefore it is not possible to get a corporate bank account. As such, depending upon who your intended clients will be, check in advance if they will pay into your personal account - some larger organisations refuse to pay into personal accounts. If this is the situation, then you would be forced to consider a business license in order to be able to set up a corporate bank account.
- Do I need to keep audited accounts? All businesses are required to keep accounts to international standards. Whilst a freelancer permit is not a business, it is good business practise to maintain accounts, especially as you will be using a personal account for expenses and payments, which will combine your personal transactions. Additionally, it will be easier to transition the accounts if you expand to a business license at some point in the future and subsequently sell the business.
- Do I need to register for VAT? You can voluntarily register for VAT once you start earning AED187,500 per annum. The mandatory threshold for VAT registration is AED375,000. However, the TAX Authority can do an audit at anytime, particularly if they suspect you should be VAT registered. This is another good reason for keeping accounts from day one! It's worth reading the comments of Rajeev Samtani, Co-founder and managing partner of Xcel Accounting, (one of Gateway's Business Partners) for his advice and comments for freelancers registering for VAT in an article by The National.
What are the requirements for applying for a freelancer permit?
Each issuing authority will have their own requirements for a freelancer permit. However, to provide an example, if you want to get a media freelancer permit with TWOFOUR54 free zone in Abu Dhabi, the following documents are currently required:
- Passport Copy
- Passport-size photo
- Updated CV
- 2 professional references (with contact details)
- Work offer or a Letter of Intent (LOI) from a TWOFOUR54 business partner. If you do not have these it will be necessary to submit a detailed business plan.
Does the freelancer permit provide a visa?
It is necessary to check the requirements of the issuing authority. Some will allow you to retain your visa sponsored by your existing employer/spouse providing you supply an NOC. Others will require that a visa is obtained via their specific free zone.
It it is worth considering that should you need to sponsor family members it will likely be more difficult if you have a visa directly related to a freelancer permit and you are unable to show sufficient, regular income.
What is the cost of a freelance permit?
The cost of freelance permits varies depending upon the issuing authority and can cost up to AED20,000. This permit is renewable annually.
Special Offer - freelancer permit fees waived
TWOFOUR54 media free zone in Abu Dhabi is currently waiving its fees for setting up a freelancer permit for media-related freelancers. The only fees required related to the visa. For more information CLICK HERE.
If your skills fit the requirements for a freelancer permit and your longer term goals are only to ever work on your own, then a freelancer permit could be the right option for you. However, I hope the above article demonstrates that there are a number of variables which should be considered, other than just the cost, such as your visa situation, your current work situation, who your anticipated clients will be and whether they will work with freelancers and pay into personal accounts and if your longer term goal might be to scale up and possibly take on staff. This decision shouldn't be taken lightly because rushing in and getting wrong will end up costing you more in the long term. Also, getting business licenses in some instances isn't necessarily much more expensive and could be more suitable, as well as provide you with more credibility. Gateway Group can help to determine which license is the most suitable for your requirements so that you get it right first time and are fully covered to provide the services that you want and are not operating at risk. Email us to arrange an appointment to discuss starting your business.
Written by Jenny Hunt, Founding Partner & CEO, Gateway Group of Companies, Abu Dhabi UAE
Protect your business and profits and have an efficient business setup in Abu Dhabi by engaging the award-winning Gateway Group to deliver our customised business setup, corporate local sponsorship, and visa processing. To establish your business in the UAE, Email us: Info@GatewayToAbuDhabi.com
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