The UAE market is divided into different economic zones or jurisdictions – mainland, free zone, and offshore. Each jurisdiction has its own set of regulations, advantages, and limitations. Owing to these distinctions, Dubai free zone companies cannot do business in Dubai mainland.
Free zone businesses are not permitted to carry out activities outside their jurisdiction. Before we understand why this is the case and if there is a way for Dubai free zone companies to do business in Dubai mainland, it is important to know the difference between a free zone and mainland.
What is a Free Zone?
A free zone, also known as free trade zone, is an economic region that provides easy company formation. The UAE free zones were established to increase international business in the country. Free zones offer tax advantages and 100% ownership to foreign nationals. Free zone businesses can benefit from the single-window convenience offered by most free zones in Dubai and across the UAE.
What is Mainland?
In the UAE, mainland is the main part of each of the seven emirates and is the jurisdiction that is politically, economically, and demographically more important. Mainland businesses and mainland companies have fewer restrictions and are free to operate anywhere across the UAE and internationally. A mainland company is also referred to as an onshore company. It is licensed by the respective Department of Economic Development (DED) of the emirate where you decide to register your business.
Why is a Dubai free zone company not allowed to do business in Dubai mainland?
As per Law No (13) of 2011, the Department of Economic Development (DED) in Dubai is the only agency authorised to issue trade licenses for Dubai mainland business setups. In accordance with this law, no business is permitted to conduct economic activities in Dubai outside the free zones except through a corporate entity licensed by the DED. Violation of this law can lead to fines up to AED 100,000.
How can free zone companies do business in Dubai?
Generally, free zone jurisdictions do not permit companies registered under free zone authorities to do business in Dubai Mainland. However, this limitation is only imposed on B2C entities. B2B companies in free zones are free to do business in UAE mainland
In the case that a free zone company wants to do business in Dubai Mainland, it must acquire specific licenses and documentation from the Dubai DED. Free zone businesses also have the option to connect with a DED-licensed distributor to operate in the mainland. Apart from this, free zone companies can also conduct business in Dubai mainland through a civil company, limited liability company, or by establishing a branch office.
For in-depth information about whether free zone companies can do business in Dubai mainland, speak to our business setup consultants. They will take you through the differences between a mainland and free zone business setup. They will also advise which jurisdiction best fits your business activity, provides you growth opportunities, and is cost-effective at the same time. Book your FREE business setup consultation today! Call us on +97144081900 or WhatsApp us on +971507775554. You may also email us at [email protected] or visit www.shuraa.com
