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How to change a free zone in Dubai: a guide for businesses

How to change a free zone in Dubai a guide for businesses - Makebiz

Dubai, one of the leading business and trade hubs in the Middle East, offers numerous free economic zones, each with its own unique benefits and conditions. However, companies sometimes need to change their registration location due to various factors such as changes in business strategy, the search for more favorable terms, or the expansion of opportunities. Let’s take a closer look at how to properly carry out this process and the important aspects to consider.

The decision to relocate can be driven by both economic and strategic reasons. As a business grows, the initially chosen jurisdiction may no longer meet its current needs, prompting entrepreneurs to consider changing free zones.

Among the most common reasons are:

  • Cost optimization. Many free zones periodically revise their pricing policies, offering more favorable registration and license renewal terms, as well as reducing office and warehouse rental costs. Additionally, some jurisdictions eliminate additional or hidden fees, significantly reducing a company’s operating expenses.
  • More advantageous location. Relocation may be driven by the desire to bring the business closer to key customers, suppliers, or logistics hubs. Being located in an area with developed infrastructure and easy access to seaports, airports, or industrial clusters can enhance operational efficiency and reduce delivery times.
  • Business development and scaling. As companies expand, they may need more warehouse space, additional licenses, or access to specialized industry infrastructure. Choosing a different location allows them to adapt their corporate structure to new challenges and create more favorable conditions for further growth.
  • Changing regulatory requirements. Some free zones offer more flexible conditions for certain types of businesses, simplified approval procedures, or the ability to combine multiple activities under a single license. This makes them attractive to companies planning diversification or entry into new markets.

Thus, changing a free economic zone is not only a way to cut costs but also a tool for strategic business development, enhancing its flexibility, efficiency, and competitiveness.

One of the first questions entrepreneurs face is whether it’s possible to directly transfer a business license from one zone to another. Unfortunately, this is not possible. Each free zone in Dubai operates as a separate jurisdiction, meaning a license obtained in one zone is invalid in another. Therefore, specific procedures must be followed to change the free zone.

There are two common options:

  1. Opening a branch in a new jurisdiction. This allows you to retain the current license in the old zone while obtaining a new one in the desired zone. However, the branch will be considered a separate legal entity, requiring additional resources and management considerations.
  2. Redomiciliation. This process, allowed in some free zones, enables the transfer of a business from one zone to another with minimal costs and without the need to liquidate the old company. However, not all zones support redomiciliation, and in some cases, it may be considered liquidation, requiring re-registration.

Before starting the relocation process, entrepreneurs should consider several key points:

  • License fees and discounts. Some free zones offer promotional packages, rental discounts, etc., which can significantly reduce a company’s operating costs.
  • License transfer rules. Each free zone has its own characteristics and requirements for obtaining licenses. Some may not offer the type of activity you need or require additional approvals.
  • Tax reporting. Relocation may require tax reporting in the parent company’s country. Ensure you have all the necessary documents and information to comply with tax requirements. Some jurisdictions may have stricter reporting requirements when renewing licenses.
  • Potential risks. Errors in the relocation process can lead to operational disruptions, license delays, or loss of counterparties. Careful planning of each stage is essential.

When redomiciling, you will need to follow these steps:

  1. Obtain a shareholders’ resolution. This document formalizes the decision to transfer the company from one location to another. You will also need the following documents:
  • A valid license.
  • An extract from the commercial register.
  • A certificate of company incorporation. It is advisable to send a draft resolution to the chosen free zone to coordinate the wording and avoid delays.
  1. Obtain pre-approval from the new free zone. Once obtained, submit the approval letter to the current zone to initiate the exit process.
  1. Request a No Objection Certificate (NOC) from the current free zone. This certificate confirms that the current zone’s administration has no objections to the jurisdiction change, allowing the redomiciliation or business transfer process to proceed.

Typically, the free zone will issue a NOC if the company has fulfilled all its obligations to the regulator and third parties. This usually includes:

  • No outstanding government fees, rent payments, or other financial obligations.
  • Settlement of all current contractual obligations and no open claims from government agencies.
  • Closing or transferring active bank and other corporate accounts, if required.
  • Obtaining necessary approvals from the lessor, management company, or other contractors, if needed.
  • Notifying auditors, creditors, and other interested parties about the planned relocation.
  • Publishing an official notice of the jurisdiction change in the media or other sources, if required by law.

Keep in mind that the specific list of conditions and documents may vary depending on the chosen free economic zone. Before starting the procedure, it is recommended to clarify the internal requirements of the relevant regulator and prepare a complete set of supporting documents.

  1. Document verification. After receiving the NOC, the new jurisdiction will verify the passports of the company’s shareholders and directors. This is a standard procedure to confirm the identity and legitimacy of business participants.
  1. Moving to a new location. Once all documents have been verified and approved, you will need to submit the exit certificate to the new free zone. Based on this, the new zone will replace the preliminary business license with a full trading license.

Changing a free zone in Dubai is a complex process that requires careful preparation and consultation with specialists. Regardless of the reason for the move, this approach will help minimize risks and simplify the transition process, ensuring the uninterrupted operation of your business.

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