Easy company formation, hundred percent foreign ownership, zero percent taxes, and other such excellent perks are proven to draw hordes of seasoned business owners and budding entrepreneurs to the shores of the UAE Free Zones.
Why, then, do so many investors each year swap the safety of a free trade zone for the uncertainty on the Dubai Mainland?
Put simply; this is a logical progression of a successful business.
Right off the bat, setting up a business in one of the UAE’s forty-five free trade zones is prudent. Over thirty thousand companies are currently trading from the three most prolific UAE free zones alone.
Rising entrepreneurs can start their company in a free zone and hop on the fast-track via pre-packed licenses, employee visas, and corporate bank accounts.
This paradigm works well for those who want to test the climate. However, as hardened veterans may attest, a time comes when expanding your business is the only logical progression, and that demands a DED license and relocating to the mainland.
Free zone companies are ideal starting points for UAE business. These economic zones offer a chance for new entrepreneurs to establish their enterprises in an opportunity rode business landscape, and to get the knack of doing business there.
But, Diversification– vital for continuing growth and expansion of your business is restricted here. These restrictions are what makes the businesses that have initially found success in the free zones and who wish to further capitalize and invest in that promising start.
If you observe the aforementioned paragraphs, we can see a common theme emerging. The freshly-arrived entrepreneurs who have found their bearings of the UAE business in the free zones, are ready to strike into new horizons armed with the knowledge that you acquired through your initial success there.
With the right guidance from company formation specialists, relocating from a free zone to Dubai mainland is a smooth and manageable move.
Now, we look at three reasons for how you can venture into the profoundly profitable realm of Dubai mainland.
1. It’s necessary for growth
After spending some time in a free zone, your company may be in a position for expansion. One of the biggest pulls of the UAE is its stable, diverse, and dynamic economy. Free trade zones are ably stationed in the country so that it can tap into this wealth easily. However, there comes a time where one invariably finds their growth potential limited by clear-cut rules on staffing, offices, and interaction with the Dubai mainland.
Inherently, the free zone licenses confine enterprises to a designated zone, and they can not do direct business with the Dubai mainland. If your free zone company is going to evolve into a mainland company formation in Dubai, then first, you have to start trading with the mainland UAE entities. To do that, you have to pay customs duty via local agents who will charge you for their services.
If that all seems a bit complicated for you, then you can simply open a mainland branch of your free zone company by registering with Dubai’s Department of Economic Development (DED).
Having said all that, now is a good time as any to consider the switch. The UAE Ministry of Economy has just announced that the restriction on foreign investors from owning more than forty-nine percent of onshore companies in the UAE has been partially lifted.
The divergence from such a long-standing principle in the UAE law signifies a strategic move to support the future growth of the country through foreign investment.
The change in the general perception that this brings counts for a lot – a move to the Dubai mainland is a powerful statement of intent that your business partners, your clients, and your distributors and suppliers will buy into.
2. It Enables and Promotes Diversification
For your free zone company, growth might translate into diversifying into new services, products, or sectors. For mainland companies, doing so is an easy administrative decision. But In a free zone, this small thing needs more work.
Free zone authorities in charge of issuing business licenses and permits tend to write everything in detail so that the entrepreneurs don’t step out of line. Typically one named industry per license is allowed. If you wish to broaden your horizons by migrating into a new vertical, you need zone sign-off – a law with strict and inflexible requirements that are regularly denied to applying businesses.
If you want to indulge in Employee diversification oftentimes, you are not permitted to do that. For example, Dubai’s Media City Free Zone only accepts companies that work in the media and media only. It’s the same in Dubai Healthcare City (healthcare). If your diversification plans don’t reflect your chosen free zone, a negative response is to be expected.
3. It Gives Access to Lucrative Government Contracts:
Gaining the favors of the government anywhere in the world is a huge advantage for business owners. Similarly, in the UAE, if the government bestows its tender to you, it means that you are a respectable and trustworthy business entity.
Not to mention are exceedingly profitable if you manage to snag one of these coveted tenders. Last year, the government spent a total of over 4 billion AED on upgrading infrastructure and nearly spent 1.2 billion AED on education. And the value of ongoing UAE construction projects is estimated to be a staggering 3 trillion AED. This all means that there is a windfall happening in the Dubai mainland, and you are missing out by staying in the free zone i.e., the proverbial sidelines.
Furthermore, with the UAE having secured the hosting of the renowned world Expo 2020 in Dubai, government expenditure is set to sky-rocket with fresh requirements for construction and development. Ahead of World Expo 2020, AED Eleven billion worth of contracts will be fulfilled.
The UAE is perpetually and relentlessly evolving. Obviously, getting a piece of that evolution could be life-altering. The problem is that free zone companies cannot apply for the bidding. Only mainland company setup can bid for government jobs and tenders.
Once again, the only foolproof way for a free zone business to expand is to turn to the Mainland and re-register. Once the company set up in Dubai mainland is complete, and a license is obtained, can you proceed and diversify. On the flip side, there’s no longer a third party– regulatory authority– deciding the fate of your business.
Your time to Go Mainland:
Free zones are fantastic places to get your feet wet and get to know the business landscape of the UAE and offer a proven and safe path towards establishing a business in the UAE. They are by nature, however, limited in how they can expand and capitalize on initial success within this magnetic, kinetic economy.
Life beyond the free zone is full of freedom and opportunity (both investment and business). Perhaps 2020 is the year you switch to the rewarding horizons of Dubai Mainland?
To make your transition from a free zone enterprise to a mainland company formation dubai the usual course of action is hiring of company formation specialists that can handle the nitty-gritty of the incorporation process so that you can focus on growing your business.
KWS Middle East, is dedicated to helping clients forming a company in Dubai Mainland, providing guidance every step of the way to ensure a smooth experience.
For more information regarding setting up your business in the UAE mainland or free zones
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