Dubai boasts plenty of potential business opportunities to be explored upon its diverse economic industries. Dubbed the Land of Opportunities, Dubai has been a namesake for professionals across the globe to come and source for new career prospects as well as creating business ventures across the UAE. Nevertheless, it is worth noting that the UAE’s business environment comprises of two different business sectors, which will affect your company’s business structure in creating a new business setup in Dubai. These two distinct business environments are the Free Zone sector and Dubai’s Mainland business sector.
Upon noting whether free-zone companies can do business in Dubai’s Mainland, it is imperative that business owners understand the core structures of Free Zone economies and Dubai’s Mainland environment respectively. Business setup in Dubai Free Zone areas is usually catered towards a targeted industry for each zone although some may comprise of different numbers of industries altogether. This in itself rules that sufficient business analysis is required to ensure the best strategic location for your business needs.
Furthermore, Free Zone company formation enjoys more lenient regulations in which potential foreign owners can expect:
- 100% company ownership
- 00% free of taxes
- 0% corporate tax charges
- 0% income tax charges
- Minimal operational expenses
All this would benefit greatly towards the long-term survival of a business. Nevertheless, the drawbacks of Free Zone company formation are the little bit longer period of business incorporation as well as the limited target audience which is specific towards each individual Free Zone respectively.
Dubai’s Mainland companies enjoy other beneficial attributes in having its business registered within the whole UAE.
Dubai’s Mainland company formation provides undergoing a registration process with the Department of Economic Development (DED). Upon inception, the business will be readily available to run anywhere in the country as well as having businesses globally. Nevertheless, in order to qualify, a foreign company will have to hold 49% of the company shares wherein a minimum 51% number of shares are to be held by a UAE national. This protects the country’s interest in ensuring the local economy will continue to grow despite any foreign market penetration. There are certain conditions where this may be lifted but will require even more applications to be submitted to the Ministry of Economy.
Still, having a business incorporated in Dubai’s Mainland ensures:
- No restrictions on local employee recruitment’s
- No yearly auditing
- Access to all industry practices in Dubai’s Mainland
- Minimal import charges and fees
With the above clearly picturing the differences of company formations in Dubai, it is understandable that the UAE has decreed Free Zone companies to be ineligible to do businesses in Dubai’s Mainland. To protect the local economic interests and promote the country’s own developments, Dubai’s Mainland industries are being regulated from any outside interferences.
However, there are certain conditions that the country has implemented to permit Free Zone companies to trade businesses in Dubai’s Mainland. These revolve around some areas of interest:
1. Civil Organization:
Professional practitioners incorporating a business in the fields of medical expertise, civil engineering, legal firms, and such others are allowed access to conduct business dealings in Dubai’s Mainland. In order to provide for Dubai’s local professional services sector, skillful talents will always be required to ensure the continued welfare of the community as well as the development of the local economy. Nevertheless, a Local Service Agent is compulsory to be appointed if the civil company is not majority-held by a UAE national.
2. A subsidiary of a Free Zone Company:
Established companies operating in any of the Free Zone areas of UAE are allowed to incorporate a subsidiary business company within Dubai’s Mainland community. However, you will initially be liable to register accordingly with the DED before any other processes can take place. Furthermore, an application will also need to be submitted to the Ministry of Economy for approvals pertaining to any local company shareholders in the parent company. This will also lead to the appointment of a Local Service Agent to oversee the regulations to be practiced by the branch company within the servicing business demographics of Dubai’s Mainland.
Incorporating a subsidiary company requires submissions to DED and the Ministry of Economy whilst also having to appoint a Local Service Agent in the area. In addition, certain business activities will also be prohibited in Dubai’s Mainland which are:
- Trading and sales of goods
- Public eateries like cafes and restaurants
- Umrah and Hajj services
- Recruitment and labor services
- Commercialized agencies
3. Limited Liability Company (LLC):
Incorporation of a new company in Dubai’s Mainland will be in the form of Limited Liability Companies whereby the company provides foreign shareholders holding up to a maximum of 49% of the company while local UAE nationals will comprise of the other minimum of 51% shares. This allows for full business control within Dubai’s Mainland albeit the company will be majority-held by a local UAE shareholder. Nevertheless, having an LLC incorporated will provide less fuss in penetrating Dubai’s local markets while committing to running the business as usual.
4. Lastly but Most Importantly:
Companies registered with free zones can also contact a local distributor who is having a DED license in order to target the local market and do business in Dubai Mainland as well.
With all these shared, it is quite evident that the process of company formation in UAE is a long and tedious process. This is where business setup consultants in Dubai, such as the Business Link UAE, play a major role in assisting new companies to be incorporated within the confines of government laws and regulations.
PRO services in Dubai are also offered for any collation of documentation and business materials required. Having a prosperous local economy, it may also be smart to find any local corporate sponsor in Dubai to help facilitate your brand’s awareness whilst saving as many initial costs as possible. Regardless of where you are in the business start-up cycle, you are sure to reap the rewards in tapping into the opportunities presented within UAE’s and Dubai’s booming economy.