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Dubai May Change Free Zone Laws to Attract Foreign Investors

Middle East : 30 October 2011

Source: Times of Oman

For the first time, the Department of Economic Development (DED) in Dubai, is contemplating allowing companies that are licensed in free zones to operate directly — both inside and outside the free zone.

If this goes through, it will make a fundamental difference to the way businesses operate in Dubai and could vastly increase the number of foreign investors to the emirate, according to DLA Piper Middle East, a global law firm.

Dubai has pioneered the concept of freezones where foreign companies and nationals could set up companies which are 100 per cent owned by them. These freezones, while geographically contiguous to the rest of Dubai, were treated as being ‘offshore’ jurisdictions and companies set up in these free zones were only licensed to undertake business in these freezones.

“If these changes go through, they could have a fundamental impact on businesses operating in Dubai freezones, however the Department of Economic Development is yet to fully outline how this would work in practice,” commented Murad Abida, head of Corporate Middle East at DLA Piper.

“It is expected that the DED will only allow companies in certain free zones, from certain sectors, the right to operate fully both on and off shore, but even this would be a great step forward and we believe would attract a greater number of foreign investors to Dubai.”

Until now foreign companies seeking to conduct business in ‘onshore’ Dubai without a UAE national or firm as a partner only had the option of setting up a branch office.

The disadvantage of a branch office from the perspective of the parent company was that, since a branch is considered to be a part of the parent, all of the profits and losses of the branch were accounted with those of the parent and there was no scope for separating them from the parents accounts.

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