Is the 100% foreign ownership flexibility a question mark on the UAE’s free zones
Is the 100% foreign ownership flexibility a question mark on UAE's Free Zones?
100% foreign ownership allowed – how exciting it sounds for any country. The UAE government made this change effective from June 1, 2021. This will have a great impact on the existing businesses in mainland UAE as well as new investors. This rule will also affect the appeal of free zones in the UAE.
Let us explore how this rule affects the growth of free zones in the UAE. If you are planning to invest in a business in a free zone, do read further. You will get to understand the impact this rule will have on your plans.
The key rationale behind the change in law was to develop the economy further. This will happen if the performance of several industry sectors improves. For years, the UAE was dependent on revenues from oil exports. But, in the 20th century, the government started making strategies to diversify the economy.
The impact of the change on free zones of UAE
It will affect the business of free zones in the UAE for sure. Earlier, investors preferred free zones to onshore UAE because of permission to have 100% foreign ownership. Now, with the same benefit available in mainland UAE, free zones might lose their exclusive appeal.
Also, there is another key constraint in free zones. Companies in free zones cannot cater to companies in mainland UAE. So, they do not have the flexibility to trade in UAE, losing revenue opportunities. This is the area where they lose some business in comparison to onshore companies.
Now, the competition of free zones with onshore will not depend only on the foreign ownership factor. Businesses or investors looking to form a company in UAE will consider many other factors. Even the free zones will start enhancing their game in other ways to lure investors.
These factors in which free zones can start differentiating will include:
Free zones can differentiate in any possible way. This may bring a change in their attractiveness to investors. It will give free zones another competitive advantage over onshore.
Business Setup HQ – your go-to expert partner for investing in UAE
So, free zones and onshore will continue to run parallel in UAE. Both of these will contribute to the UAE’s appeal as an attractive destination for businesses. But, we still need to wait and watch to know the actual impact of the new law. The new regulatory change has created a certain uncertainty about free zones’ growth.
But, with the above details, you can achieve clarity on the situation of free zones. This understanding will enable you to decide where to set up your company in UAE. If you are still considering the options and have confusion, contact us.
About Business Setup HQ
Business Setup HQ is a leading provider of company formation services in the UAE. If you intend to establish your business in onshore or free zones of the UAE, we are there to help you. We will help you with all the procedures to ensure a smooth company formation process for you. If you intend to change your business structure, we can ensure a smooth switch for you.
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