Can You Move a UAE Free Zone Business to Mainland?

There are many reasons why businesses are incorporated within UAE free zones, including flexible structures, ease of establishment, and the availability of specialized business environment. But, once a business grows and expands, there might be some desires for freedom to operate from the UAE free zone and work within the UAE mainland market.

The question that then arises here is whether it is possible to Transfer a UAE Free Zone to Mainland?

In most cases, this is possible, but, again, it does not necessarily mean that a company can just move from one business place to another without any adjustments in terms of company’s structure or registration process.

This guide describes all the main variants and processes founders must know about before taking any steps.

What Does Moving From a Free Zone to Mainland Mean?

The relocation of the company from the free zone into the mainland requires a restructuring of the business operation such that it is capable of conducting its business within the UAE mainland license and regulations.

However, in a practical sense, the relocation of a Free Zone to Mainland Company would not only entail the change of the licensing addresses.

Founders could decide to:

• Establish a new mainland company.
• Maintain the existing free zone company and create a mainland entity.
• Restructure or transfer certain business operations.
• Cancel the free zone license and establish the business on the mainland.

Choosing the right alternative is based on the company’s goals, operations, ownership, agreements made, workers, and licensing issues.

Why Would a Free Zone Business Move to Mainland?

Free zone operations can be extremely beneficial for some companies; however, expansion will bring about different requirements. Founders of companies may choose mainland operations due to the following reasons:

• Access a broader UAE customer base.
• Conduct activities that require mainland licensing.
• Open offices, retail outlets, or other physical locations outside the free zone.
• Participate in certain local projects or contracts.
• Expand business activities.
• Build a larger operational presence across the UAE.
• Work with customers who prefer contracting with mainland companies.

In order for founders to take the step of moving to Mainland from the Free Zone Business, it must first be decided whether the current structure of the free zone is hindering the business.

At times, a company in the free zone can keep running while the founders create another company in the mainland.

Main Options for Moving a Free Zone Business to Mainland

There is no single procedure that applies to every business. The following are the most common approaches.

1. Set Up a New Mainland Company

Perhaps the simplest option would be to incorporate a new mainland company while retaining the current free zone company.

The new company will operate using the mandatory mainland license, whereas the operations which are still within the scope of the current company will continue with the latter company.

This can be considered in the following situations:

• The founder wants to preserve the existing free zone company.
• The free zone business has valuable contracts or assets.
• The company wants to test mainland operations before restructuring completely.
• Different entities can serve different business functions.

2. Transfer or Restructure the Business

There may be some instances where the founder will decide to transfer some of the functions, assets, contracts, employees, and operations to the mainland firm.

This may be more accurate as being reorganization of the business than mere transfer of licensing.

The feasibility of such an option will depend on the authorities, business operations, regulation, contracts, and other factors.

This is particularly true when it comes to business that has some assets, employees, intellectual property, or contracts in place.

3. Close the Free Zone Company and Establish a Mainland Entity

The other possibility would be to terminate the free zone company and set up a mainland company.

This could be considered if the owner does not require the free zone system anymore but rather wants to run the business through the mainland license.

However, owners should avoid terminating their license until they:

• Outstanding liabilities.
• Tax obligations.
• Employee visas and sponsorships.
• Bank accounts.
• Supplier and customer contracts.
• Lease agreements.
• Government registrations.
• Intellectual property and business assets.

Proper closure and transition planning can help avoid unnecessary complications.

UAE Free Zone to Mainland Process 

It will depend on which emirate you are in, what type of business, and what authority you are dealing with. But here is a possible progression.

Step 1: Review the Existing Free Zone Company

Start by reviewing the company’s current structure.

Check the:

• Legal entity type.
• Free zone license.
• Business activities.
• Shareholding structure.
• Existing permits.
• Employees and visas.
• Office or lease arrangements.
• Contracts and liabilities.

This determines whether restructuring, dual setup, or a complete transition is more appropriate.

Step 2: Determine the Mainland Licensing Requirements

Now comes the task of determining what kind of business activity and the associated license in mainland China is required.

Various kinds of activities can have various types of approvals and requirements. Some regulated activities can have special requirements.

Step 3: Choose the Mainland Legal Structure

The founders will have to select the right type of business based on the structure, ownership, liabilities, and operations.

The choice needs to be made prior to applying for the license in the mainland since it may impact the process of filing and licensing.

Step 4: Prepare Documents and Approvals

Typical documentation can include:

• Passport and identification documents of shareholders.
• Existing company documents.
• Proposed business activity details.
• Memorandum or incorporation documents, where applicable.
• Office or tenancy documentation.
• Required external approvals.
• Corporate documents for existing entities.

Requirements may differ, so it is advisable for entrepreneurs to establish the actual requirements from the concerned mainland authorities.

Step 5: Complete Mainland Licensing

With all the necessary approvals and papers completed, the license for the mainland entity will be issued.

Post-license issuance, there could be further registration requirements concerning immigration, labor, tax, bank, and other regulatory registrations.

Step 6: Handle the Free Zone Company

In case of the closure of the original free zone entity, the founders will have to handle its cancellation and clearance process separately.

However, in case the company needs to continue functioning, the founders must make sure that both entities comply with regulations and maintain distinct activities and transactions.

Documents You May Need For UAE Free Zone to Mainland.

The documentation for a Transfer Free Zone Company to Mainland arrangement depends on the selected structure.

Common documents may include:

• Shareholder identification documents.
• Existing free zone license.
• Certificate of incorporation or registration documents.
• Memorandum and Articles of Association, where applicable.
• Board or shareholder resolutions.
• Business activity details.
• Office or tenancy documents.
• NOCs or external approvals, if required.
• Corporate documents for restructuring or ownership changes.

A document review before starting the process can help identify missing approvals and reduce delays.

What About Ownership?

Ownership is a key factor to consider when transitioning from the free zone structure to the mainland structure.

The UAE laws permit 100% foreign ownership in many mainland business activities, but there may be certain conditions attached to the activity depending on the applicable law.

As such, owners should not just automatically transfer their ownership structure to the new mainland firm without considering the laws.

What Happens to Employees and Visas?

Review of the employees and residence visa is necessary in this regard.

In case the original company in the free zone is closed down, there may arise a need to cancel or transfer the sponsorship of the employees in accordance with the relevant process.

In case a new mainland company is created while the free zone company is still operating, the founders have to decide which company will sponsor which employee.

This becomes more critical in case of companies that have several employees.

Costs to Consider

The cost of transferring to mainland status will depend upon the selected method as well as the needs of the particular company.

Possible costs may include:

• Mainland license fees.
• Government and registration charges.
• Office or tenancy costs.
• External approval fees.
• Legal or documentation expenses.
• Visa and immigration costs.
• Free zone cancellation charges, if applicable.
• New corporate registration expenses.

Rather than focusing only on the initial license fee, founders should calculate the total transition cost for the first year.

Free Zone vs Mainland: Which Is Better?

Neither of them is superior in all cases. The decision depends on the goals of the company.

It might continue being relevant if the business targets mostly foreign clients, exists in a particular ecosystem, or doesn’t need to expand its scope of operations onto the mainland.

The structure that implies the existence on the mainland might be more useful in case the company needs more flexibility of movement around the UAE.

Sometimes, having both of them makes the best sense.

Key Things to Check Before Moving UAE Free Zone to Mainland.

Before starting a UAE Free Zone to Mainland transition, founders should review the following:

1. Business activity: Confirm that the desired mainland activity is available and identify any special approvals.
2. Legal structure: Identify the right mainland body.
3. Ownership: Check the owner rules relevant to the activity.
4. Contracts: Consider if modifications to existing agreements should be made.
5. Employees: Consider visa and job changes wisely.
6. Tax and accounting: Analyze the consequences of restructuration or closure of the organization.
7. Banking: It is important to decide whether the current banking arrangements will suffice or not.
8. Premises: Check mainland office or tenancy requirements.
9. Free zone obligations: Clear outstanding fees, contracts, and regulatory requirements before cancellation.

Should You Close the Free Zone Company?

Of course not.

Closing down the company operating under the free zone license could be the right step in case the founder wants to switch his operations entirely to the mainland. Nevertheless, keeping the company as is and forming another one in the mainland could give some advantages.

The decision must be made depending on the business goals of the company rather than only because there is a need to change the license place.

For instance, a growing company can continue operating through its free zone entity abroad while performing its operations on the mainland through another company.

Conclusion

Shifting the business from a free zone to the mainland may be an option where the company’s expansion plan calls for more market access within the UAE or a different licensing system.

When thinking of shifting from a UAE Free Zone to Mainland, the founders must first consider their type of business activity, the current legal status, agreements, workforce, taxes, and possible expansion plans in the future.

When planning to set up a Business on the UAE mainland, we can guide you to find the right way to do it.

Frequently Asked Questions

Can I directly convert my free zone company into a mainland company?

It doesn’t always have to work that way. It may not be possible to directly convert your license for every case. This is due to the free zone and the activities carried out by the business.

Can a free zone company operate in mainland UAE?

A free zone firm might have the freedom to do certain things in the mainland, depending on licensing and other requirements. This will all depend on the type of activities and emirate.

Do I need to cancel my free zone company?

Not really. You could keep the free zone company and set up an independent business on the mainland. If that would work for you depends on your business model.

Is mainland company setup more expensive than a free zone setup?

Costs vary significantly. The cost of setting up operations in mainland will differ because of various factors such as licensing fees, office fees, approval fees, visa fees, and registration fees.