The new laws brought out earlier this quarter, which allowed 100% foreign ownership of mainland business in the UAE, came as welcome news to foreign investors and expat business owners in the country. Until now, foreign ownership of businesses was only permitted in the specific free-zones that are distributed throughout the city. So what does that mean for free zones now? Whilst 100% ownership of businesses can now be had in both mainland and free-zone areas, it is still important for companies to do their due diligence when checking whether they should opt for mainland or free-zone license.
Industry specific free-zones
It may be beneficial for a company to operate in an area that is specific to their industry. There are multiple free-zones throughout Dubai, although many of them are specific to a certain sector. Healthcare City has a focus on medical services. Dubai Media City features mostly media companies such as publishers, TV, Radio and media agencies. By having one area dedicated to the industry means that there are other similar businesses in close proximity that can complement each other in their products and services, help gain new clients and contracts, or even work together.
Established business areas
Dubai free-zones have been hosting businesses for years, and as such tend to have a well-established infrastructure in place to aid businesses. Dubai free-zones tend to have excellent trade links and are in highly convenient locations, depending on their industry focus.
Dubai airport free-zone has direct access to Dubai International Airport, meaning it has easy access to customs as well as making import/exports more efficient. DMCC is conveniently located next to Sheikh Zayed Road, with great transport links, meaning it has easy access to the rest of the city.
Further to this, free-zones in Dubai have their own regulatory body that oversees business operations in the area. Not only do they allow certain business activities that a mainland licence would not permit, but they often have different regulations and rules to the mainland, meaning it can still easier to set up a company within a free-zone.
Free-zones also enjoy tax and duty exemptions, meaning that they can be a more profitable area for companies to set up.
Businesses applying for an operating licence on the mainland need to be aware that there are rules in regards to business operations that differ from free-zone rules. As not all business activities are allowed to be conducted under a mainland license. As such, business owners need to know if they have the necessary permissions to operate on the mainland and if their activities are allowed. There are also different educational requirements for staff and stakeholders for mainland companies. Managers may need to complete a certain qualification or university degree.
Mainland business licences also need to be registered to an address, which differs from free-zone licences, which allow flexible desk options. Therefore a mainland office does not allow the same flexibility as a free-zone license in terms of how a business operates. Another big difference between free-zones and mainland licenses is that a free-zone allows a 3-year visa, whilst mainland companies are only allowed 2-year visas.
With that being said, companies with a free-zone licence are only allowed to operate within their free zone’s jurisdiction and are unable to conduct business on the mainland. Businesses with a mainland licence on the other hand are able to operate freely throughout the mainland completely independently, meaning they have greater freedom in how they conduct their business.
Whilst there are obvious attractions to a mainland visa, businesses currently operating under a free-zone licence need to be aware that they are unable to transfer their business to the mainland. If a business owner decides that a mainland licence will be more beneficial, then they will have to gain a branch license and create a new branch on the mainland. There are inherently large costs associated with this, so careful consideration should be made before making this decision.
Both mainland and free-zone visas offer attractive incentives for businesses. Company owners should make careful consideration of the opportunities and drawbacks of both before making a decision. Whilst it can be a difficult decision to make, our expert specialists are on hand to help and offer any advice on what would be the best choice for your company.