Can free zone companies do business in Dubai mainland?KWS Admin
Free zones are the selected regions of a country where business owners operate their companies with little to no imposed tax rates. These regions allow manufacturers and buyers to sell and resell, import and export goods without heavy taxations and with the help of world-class infrastructure. The reason for the existence of free zones is to help create economic activity in the selected regions and boost the economy overall.
Companies associated with free zones are allowed to directly provide goods and services to business deals that are taking place in the same free zone. This is a great opportunity for entrepreneurs to set up their new business set up in UAE in inexpensive areas. For example, a newly set up company manufacturing clothes to export can prove to be a highly expensive endeavor. Buying the machinery, recruiting staff, exporting the goods etc. will be costly. Therefore, setting up the business in a free zone regions can decrease the tax rates. The money retained in the operations of such businesses can be further invested into the business.
Can free zone companies do business in mainland?
Although there has been confusion regarding the topic, it should be clear that free zone entities are mostly not allowed to operate their businesses in Dubai Mainland. The Department of Economic development is the only authority that issues licenses to businesses and service providers who want to operate in Dubai Mainland. Only a corporate entity that is licensed by the said authority is allowed to operate in mainland. Violating this law can lead to penalties.
However, the authorities have provided a way to resolve the matter and for free zone entities to operate in mainland. Civil work companies, limited liability companies and branch can conduct business in Dubai. The civil work companies can be owned by foreigners completely, however, a UAE local is required to be appointed in the company.
A free zone company has to wholly own its branch and give it the same name as itself in order for the branch to operate in mainland Dubai. A UAE local service agent needs to be appointed in the branch in this case as well. If 51% of the free zone company is owned by UAE nationals, there is no need to appoint a local service agent in the branch.
It must be remembered that even after provision of license by DED for operating in mainland free zone companies face limitations in the type of activities that they can conduct in the mainland. A branch of a free zone business setup in Dubai cannot conduct trading activity, work as a commercial agency, provide labor supply services or operate as a restaurant.
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Through the services offered by KWS Middle East, the clients looking to set up their own companies in UAE can achieve strong bases for their business setup in Dubai.
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