Free Zone companies rush to restructure as DED clamps down on firms operating outside of their jurisdiction

The Links Group says its business enquiry level has more than doubled since the DED reiterated the onshore and free zone trade license rules last December.

"It seems Free Zone companies have been oversold by their licensors about where they can trade. Several companies, largely consultancy businesses, have told us they were informed at the time of registration they could still conduct business in Dubai outside of their Free Zone. This is simply not the case," said Stuart Curtis, Group Managing Director, The Links Group.

While the DED has been actively educating UAE-based and foreign businesses about their options for establishing a company in Dubai, The Links Group says confusion reigns.

"There are still many companies, particularly SMEs, that do not fully understand they cannot be trading onshore without some kind of branch office or DED-registered distribution partner," Stuart added.

According to The Links Group, some Free Zone companies admit to skirting their onshore licensing obligations because they want to save time and money.

"There are a lot of misconceptions about the cost and logistics involved in coming onshore. This can be as simple as opening a branch office in a matter days through a cost effective option. Alternatively, Free Zone companies can establish an onshore presence via a 100% owned professional license or through a local agent," explained Stuart.

In addition to regulatory compliance, long-term business development is another motivating factor prompting Free Zone companies to come onshore. The slowdown in European and US markets has elevated the importance of the UAE as a key international trade hub, while other companies attribute their onshore move to preparing their businesses for the anticipated introduction of audited reports and taxation.