Free Zone Or Onshore?

11th September 2014, Updated 18th February 2019

Free zone or Onshore? This is probably the first question to answer when deciding where to setup your business in Abu Dhabi.

Foreign companies and individuals usually lean towards a free zone initially because they can own it 100%, there is no need to engage with a local partner, and its perceived to be quicker and most cost effective. However, the below questions are intended to help you determine what is right for your business.

Who are your customers and where are they based?

The real questions to ask are who are your customers and where are they based? Trade Licenses in the United Arab Emirates are not federal and do not cover the whole of the UAE. They are limited to jurisdictions. For example, if you decide to set up onshore and incorporate a business in Abu Dhabi, your Trade License will enable you to carry out the activities listed on your Trade License, within the Emirate of Abu Dhabi. Should your business grow and expand into other Emirates, such as Dubai, Sharjah, Ras Al Khaimah, Fujairah, Ajman or Umm Al Qwain, then it would be necessary to arrange a Trade License in each of the relevant Emirates to ensure you are legal and compliant. Alternatively, if you decided to set up in one of the numerous free zones, then your activities are limited to the geography of the free zone, which is obviously much smaller than a whole Emirate. However, if your customer base is situated in the same free zone – then this is likely to be the best option for you. If you set up within a free zone and some of your customers are situated outside of the free zone, then you wouldn’t legally be able to deal with them directly and would need to set up an agreement with a local agent or alternatively, consider setting up an onshore company too. Free zones are ideal if you are wanting to do business with other companies within that same free zone or with companies overseas.

Are your customers public or private sector?

It is important to understand who your customers, or potential customers, are. Are they likely to be private sector, Government or government-related? Generally, if you are intending to work directly with the government, you will need to have an onshore Trade License.

All of the freezones have their own regulations. Its prudent to be fully aware of these and the limitations for a particular free zone and to fully understand what is allowed and what isn’t. It can be hard to obtain information, but its worth doing this research up front so that you can be sure you are investing in the most appropriate structure for your business – the last thing you want is to spend on setting up a license, premises and visas to find that you are not covered to carry out the activities that you want.

Dual Licenses in Abu Dhabi.

Dual licenses are relatively new in Abu Dhabi. They were introduced in the autumn of 2019. This type of license enables a free zone entity, which has an office in the jurisdiction where its license is issued, to apply to the Abu Dhabi Department of Economic Development (ADDED) for an onshore license. Please note, the free zone entity must be based in one of the Abu Dhabi free zones. Dual licenses are only granted for a limited number of activities, so check in advance.

Are you ready to start a business in Abu Dhabi?

If so speak to Gateway Group of Companies, Abu Dhabi's company formation authority dedicated to helping foreign companies and individuals set up their Abu Dhabi businesses correctly and cost effectively. By understanding clients' activities and goals for doing business in Abu Dhabi, Gateway helps them to understand the most suitable routes to market, including the risks, regulatory requirements, and ongoing commitments so that they can make an informed decision that is right for their business and its objectives. Gateway provides a selection of unique professional local sponsor packages for onshore companies with a focus on providing the foreign party with security, control and 100% of the profits. Gateway can also manage the incorporation process to ensure a smooth setup. Email us info@GatewayToUAE.com

Written by Jenny Hunt, Founding Partner & CEO,

Gateway Group Of Companies, Abu Dhabi & Dubai, UAE