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Dubai Expands Free Zone Companies' Reach with New Regulation

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Dubai has introduced a groundbreaking resolution allowing free zone businesses to operate anywhere in the emirate with the right permits. The move aims to strengthen economic flexibility and global investment appeal.

A Transformative Step for Dubai’s Business Ecosystem

Dubai’s new regulation, issued by Sheikh Hamdan bin Mohammed, allows free zone-licensed entities to operate beyond their designated zones, provided they secure the necessary permits from the Dubai Department of Economy and Tourism (DET). This shift enhances business agility and investment opportunities across the emirate.

Key Provisions of the Resolution
  • Free zone companies can now establish branches in mainland Dubai.
  • Licenses are valid for one year and renewable.
  • Firms must maintain separate financial records for free zone and mainland operations.
  • DET will publish a list of permitted economic activities within six months.
  • Companies are subject to inspections to ensure compliance.
Impact on Real Estate and Investment

The ability of free zone businesses to expand into mainland Dubai will drive increased demand for commercial spaces, corporate headquarters, and logistics hubs. Investors should anticipate greater demand in business districts, particularly in areas like Downtown Dubai, Business Bay, and Dubai Silicon Oasis. Additionally, the move aligns with the D33 agenda, which aims to double Dubai’s economy to AED 32 trillion by 2033.

Boosting Foreign Direct Investment (FDI)

Dubai has consistently ranked as the world’s top destination for greenfield FDI projects, with 1,117 projects worth AED 52.3 billion in 2023. This regulatory change is expected to further boost FDI by offering greater operational flexibility to international businesses, reinforcing Dubai’s status as a global investment hub.

Corporate Tax Benefits for Free Zone Companies
  • Entities must maintain ‘adequate substance’ in a free zone.
  • Only qualifying income is subject to a 0% corporate tax rate.
  • Strict compliance with transfer pricing and audited financial statements is required.
  • Non-qualifying revenue must not exceed AED 5 million or 5% of total revenue.
The Future of Dubai’s Business Landscape

This resolution enhances Dubai’s attractiveness for corporate expansion, making it easier for companies to operate across multiple jurisdictions. For real estate investors and business leaders, this evolution signals a surge in demand for mixed-use developments, office spaces, and industrial properties. Now is the time to capitalize on Dubai’s expanding economic framework.