How to transfer a mainland licence to a free zone in the UAE
When starting a new business in the UAE, choosing the right jurisdiction is a decision that impacts everything from a company’s growth trajectory and operational flexibility to its tax liabilities and ownership structure.
During your business journey, you may find that transitioning from a mainland to a free zone licence better aligns with your evolving goals and needs, such as expanding into international markets, optimising tax strategies, or lowering operational costs.
This article looks at the licence transfer process, outlining the legal frameworks, benefits, and practical steps to ensure a smooth transition.
Mainland vs free zone: an overview
If you’re considering transferring your business licence from the mainland to a free zone, it’s important to first be clear on some of the main distinctions between the two:
Business activities: The mainland offers a broader spectrum of over 2,000 business activities that a company can engage in, while free zones typically focus on a much narrower set of industries or sectors, reflecting their specialisation and industry clustering. This means that you should ensure the free zone you’re considering supports your specific business activities.
Visa regulations: Visas are a crucial factor to consider. On the mainland, companies can generally obtain as many visas as they need, with the only limit being the size of their office space and labour card requirements. This flexibility makes the mainland an ideal choice for labour-intensive businesses. In contrast, free zone companies typically only have a visa quota ranging from 1 to 6 per licence, and the costs for these visas are usually higher.
Workspace requirements: Mainland companies are expected to have a substantial physical presence. This means that they must maintain a physical office space of at least 200 square feet to obtain their business licence. Free zones, on the other hand, aren’t typically required to lease office space and can use virtual offices or flexi desk options. This represents a big saving for businesses that operate digitally or do not need a physical presence for their activities.
Market Access: While free zones provide numerous incentives, they also come with certain restrictions on direct trade with the local UAE market, which might require using local distributors or agents. This isn’t the case for mainland companies which have full access to the local market.
How to transfer a mainland licence to a free zone
- Eligibility Check: Before initiating a licence transfer, verify your business’s eligibility. Not all mainland companies are eligible to transfer their trade licences to a free zone, so you should confirm that your business activities are permissible within the free zone you’re considering.
- Required documents: Gather the necessary documentation for the transfer. This may vary depending on the nature of the business and requirements of the free zone but typically includes:
- Your current mainland trade licence,
- A no-objection certificate (NOC) from your existing licensing authority
- Identification documents of the business owners
- A copy of your company’s MoA and AoA.
- A recent company financial report
- Application process: Submit your application to the free zone authority. This usually involves filling out an application form and submitting it either online through the free zone’s official portal or in person at their offices. Be sure to include all required supporting documentation as outlined in the application guidelines.
- Approvals needed: After submitting your application, it will undergo a review process by both mainland and free zone authorities. This may involve several rounds of feedback and additional documentation. Patience is key during this phase as approvals can vary in time based on the complexity of your business and the specific free zone regulations.
- Financial considerations: Be aware of the fees involved in the transfer process. These might include application fees, registration fees, and potentially a deposit. Additionally, you’ll need to clear any outstanding dues with your current licensing authority before the transfer can be finalised.
Key considerations
The following are a few important factors to consider to ensure the transition is as smooth as possible:
Setup costs: Transitioning to a free zone may involve different setup costs compared to maintaining a mainland licence. These can include initial registration fees, the cost of leasing office space (if opting for a physical rather than a virtual office), and various administrative fees. While free zones often provide cost-effective packages, especially for startups and SMEs, it’s important to calculate the total investment required.
Tax implications: One of the most compelling reasons for moving to a free zone is the favourable tax conditions. Some businesses are eligible for tax holidays ranging from 15 to 50 years and free zones also often exempt businesses from import and export duties, which can be a considerable advantage if your company is heavily involved in international trade.
Regulatory environment: Each free zone has its own regulatory authority and set of rules. It’s crucial to understand these regulations and ensure your business activities are compliant. This may affect everything from the types of activities allowed to specific compliance and reporting requirements.
Taking the time to carefully weigh these considerations will help ensure that the decision to move from a mainland to a free zone setup aligns with your business objectives and offers the best advantages for your specific needs.
How can Global Link help?
Global Link has over 16 years’ experience working with local and global businesses, providing bespoke consultancy services for company incorporation in Dubai and the wider UAE.
We can guide you through the process of transferring your mainland licence to a free zone, ensuring that you meet all regulatory requirements and manage the transition smoothly. Our team will coordinate with all relevant parties on your behalf, providing support from the initial eligibility check through to the final approval, making the licence transfer as straightforward and efficient as possible.
If you need advice on this or for any other company incorporation, visa or PRO service, please get in touch with us on +971 4 553 9901 or email us at [email protected] and we will be happy to assist you.