It’s simple to get started, there’s no tax to worry about, and you have complete control. For the UAE free zones, proven draws are available. Why, therefore, do so many entrepreneurs opt for mainland speculation over the safety of a free zone each year? Put simply, it’s the obvious next step in the development of many successful businesses.
Starting a business in one of the UAE’s 45 free zones is a wise decision right away. Currently, the three largest UAE free zones alone are home to over 30,000 firms. Inbound entrepreneurs can land in a free zone and use pre-packaged permits, virtual offices in Dubai, employee visas, and business bank accounts to get up and running quickly.
For people who want to test the climate, the paradigm works effectively. As veterans can attest, there comes a point when development and growth necessitate a DED license and a move to the mainland.
Free zone businesses are an excellent place to start doing business in the UAE. They provide an opportunity for new entrepreneurs to launch their businesses in a unique and distinct environment in serviced offices in Dubai while learning the intricacies of the industry. Diversification, which is necessary for effective growth, and relocation, on the other hand, are restricted.
Many UAE enterprises that have had initial success in a free zone but want to expand on and invest in that promising start are feeling the effects of these restrictions.
A common thread is beginning to emerge. The entrepreneur who has used the free zone to lay the groundwork for their UAE firm and is now ready to expand into new territory, equipped with the knowledge and first success.
Moving from a free zone to the UAE mainland is a smart and manageable move with the proper UAE national sponsor or company formation specialist such as Focal Point Business Center.
The following are five compelling reasons to jump the fence: to graduate from the free zone and ensure the continuous expansion of your most profitable ventures on the mainland.
- It’s required for expansion: Your company may be able to expand after some time in a free zone. The UAE’s deep, diverse, and dynamic economy is one of its main draws. Free zones are well-positioned to take advantage of this wealth, but explicit limits on employees, offices, and interactions with the mainland will inevitably limit their expansion potential.
Free zone licenses, by their very nature, confine businesses to a specific zone and prevent them from doing direct business on the mainland. If your free zone business wants to do business with mainland UAE companies, you’ll have to pay customs duty and hire local agents who will charge you for their services.
If all of this seems too complicated, you can register a mainland branch of your free zone company with Dubai’s Department of Economic Development (DED).
Now is a wonderful time to think about making the switch. In 2018, the UAE Ministry of Economy announced that the limit on foreign investors owning more than 49 percent of onshore UAE enterprises will be partially relaxed. While the impact on specific industries has yet to be determined, the shift to such a long-standing norm in UAE law represents a strategic decision to assist future growth through foreign investment.
The shift in perception that this entails is significant — relocating to the mainland is a powerful statement of intent that partners, clients, suppliers, and business centers in Dubai will embrace.
- It allows diversification: As your free zone business grows, you may want to branch out into new products, services, or industries. For mainland businesses, this is a simple administrative task. In a free zone, there is more work to be done.
Residents are issued descriptive business licenses by free zone authorities. Per license, there is usually only one specified industry. If you want to move into a new vertical, you’ll need zone sign-off, which is a legal necessity that’s frequently denied to applicants.
For example, Dubai’s Media City Free Zone allows only media-related businesses. It’s the same in RAK Maritime City and Dubai Healthcare City (healthcare) (maritime). A negative response is likely if your diversification goals do not match your zone.
Once again, the only surefire method for a free zone business to diversify is to (re)register on the mainland. You can only progress and diversify after the setup is complete and a license has been provided. On the plus side, your company’s fate is no longer decided by a third party.
- It allows for more recruitment:To live in the UAE, a person must be sponsored, either through the ownership of a firm in the UAE or through an employment contract with a UAE-based employer. It’s a regular stumbling block.
The immigration process and personnel who are sponsored on your behalf are two areas where free zones provide value (and indeed relieve stress). However, because those employees are sponsored by the free zone rather than you, they are only allowed to work in that zone. This restricts wandering and the growth of new branches.
While obtaining visas in free zones is a simple and quick process, there is a limit. If expanding headcount is your clearest primary investment toward increased profit and growth, you will be restricted. The mainland, on the other hand, has more lenient visa policies.
In the UAE, mainland SMEs are a growing industry. According to a 2016 poll by business intelligence firm Meed, 70% of UAE SMEs expected to hire extra employees. In fact, 6% of businesses planned to hire up to 50 individuals in the coming year. That’s a lot of visas and the need for offices for rent in Dubai – and a good indication of the opportunities available.
- It allows you to apply for lucrative government contracts: The UAE government awarded contracts worth AED 1 trillion in the first half of 2017. (USD 21.3bn). In real terms, UAE state rewards are valued 25% more than Saudi Arabia, the region’s largest economy.
The estimated value of ongoing UAE construction projects, many of which are public-private partnerships, is AED 3 trillion. To mention a few, there’s the AED 24 billion Aljada project, the AED 3.67 billion MAG Eye, and the AED 3 billion Marina Mall Abu Dhabi.
It’s far from a one-hit-wonder. With the UAE securing the hosting of the renowned world exhibition Expo 2020 in Dubai, government spending is expected to rise in line with new construction and development requirements. Contracts of AED 11 billion will be completed ahead of Expo 2020.
The United Arab Emirates is constantly changing. Getting a piece of that evolution could change your life. The issue is that enterprises based in free zones are not eligible to apply. Government contracts are only open to mainland companies.
- It’s all about the possibilities: Free zones are a tried-and-true alternative for businesses that deal in professional services, such as heavy industry or international import/export. They’ve existed since the Jebel Ali Free Zone Authority (JAFZA) was created in 1985. If your company has no plans to explore the UAE mainland and content in conference room rental In Dubai, you’ve come to the perfect location.
The UAE’s economy, on the other hand, is a growth engine. Moving from a free zone to the mainland might be a game-changer if you envisage it playing even a minor role in your company’s future.
The free zones’ well-known headline benefits are good reasons to stay: Foreign ownership is 100 percent. It protects you from a tax policy shift that comes out of nowhere. Bureaucracy with a light touch While these are attractive advantages for startups and the short term, the UAE mainland’s long-term potential remains a strong pull.
If your free zone business is reliant on third parties and workarounds to gain a slice of UAE revenue, it may be time to relocate. There’s nothing to lose and everything to gain by taking this risk. The mainland UAE’s business potential, both now and in the future, is enormous.
It’s time to travel to the mainland.
Free zones are wonderful venues to integrate into UAE business life and provide a tried-and-true way to starting a company in the UAE’s unique setting. They are, by definition, limited in their ability to expand and profit from initial success in this magnetic, dynamic economy. Life outside of the free zone is filled with possibility and freedom.
