The United Arab Emirates attracts foreign investors with their investment friendly laws that are insulated from main laws of the land. The creation of Free Zones in all Emirates of UAE is one of country’s such initiatives to attract foreign investments. Free Zones are geographically specified areas with laws and regulations different from the main laws of UAE governing business entities registered in the UAE. UAE Free Zone entities are best suited to firms which have substantial business dealings outside UAE requiring logistics or other advantages of operating from UAE.
Restrictions On Free Zone Firms
Free Zone entities [Free Zone Establishment (FZE) or Free Zone Company (FZC) or Branch] are eligible to operate only from within the Free Zone in which the entity is registered and legally restricted from having business dealings outside the particular Free Zone. The Free Zone firms, therefore, cannot have an operating office outside the Free Zone in which the firm is registered.
A Free Zone entity may, however, occupy business centres for the purposes of conducting business meetings since this does not count as operation from a fully functional office. However, the Free Zone entity shall not use the address of business centres as registered address in their letterheads, common seal or business cards.
Workaround For Free Zone Restrictive Regulations
A Free Zone entity may operate a fully functional office from outside the Free Zone by registering its branch with the Department of Economic Development. The Department of Economic Development issues a business license only if the branch appoints a UAE National as its Local Service Agent.
The Local Service Agent has no control or interest in the business (no right for voting or decision making) and acts just as representative to deal with the government departments and as the sponsor of employees. A Free Zone entity may sell their products in UAE from inside the Free Zone through a Local Distributor which shall, in turn, be a legal entity licensed by the Department of Economic Development.