Freezone companies in Abu Dhabi can operate in Mainland with dual license
In a landmark decision announced by the Abu Dhabi Department of Economic Development (DED) on Saturday, companies based in the capital’s free zones will be able to operate in the mainland under a dual licence, which will reduce the cost of doing business, improve the emirate’s competitiveness as well as attract more foreign companies to the emirate.
Standard licence fees apply to dual licences. The fees depend on several factors, such as the legal form and activities to be pursued. Providing a physical location and a nameplate are excluded from dual licences. Therefore, the cost of a dual licence is 80 per cent less than that of a standard licence.
Analysts and businessmen welcomed the initiative, which will benefit some of the strategic sectors mainly related to services, trading, FMCG and financial consultancies, etc.
Under this new licence, companies can operate in Abu Dhabi, Al Ain and Al Dhafra regions.
In the first phase, the initiative is open to companies based in Abu Dhabi and in the free zones. The department is working on a second phase which will allow more companies to qualify for the dual licence.
Following the first phase of initiatives announced earlier this year, this is second phase to improve ease of doing business in the country. Dubai had also announced a number of steps earlier this year to reduce cost of doing business. A second round is also expected to be announced in September.
Saif Al Hajeri, chairman, Department of Economic Development – Abu Dhabi, noted that this initiative allows companies to expand their work outside the free zones in which they are based, further increasing their contribution to the economy.
“Dual licensing is the latest in a series of initiatives we have launched to support entrepreneurs, SMEs and the private sector, which are all key engines of the economy. In its first phase, the initiative will offer companies more opportunities to do business and grow, such as allowing them to work and partner with other government entities,” he said.
According to Abu Dhabi DED, eligible companies will need to present a non-objection certificate from their free zone, an undertaking that states no ownership of branches located outside the free zone, and a photocopy of the parent company’s free zone licence. After the application is submitted, it will be transferred for primary approval. Once approved, the licence will be printed upon the payment of the required fees.
The licence time-frame depends on the activity. Over 90 per cent are immediate activities and those are completed within 20 minutes. Other activities with a technical nature require approvals from certain entities, and those are completed within two to three days.
Suresh Panwar, ex-chairman, the Institute of Chartered Accountants of India (ICAI) – Abu Dhabi chapter, the most important aspect of this initiative is that it’ll be easier for foreign companies to operate in Abu Dhabi and they will have more opportunities to explore.
“This will definitely attract more foreign investment into Abu Dhabi. When foreign companies come with latest technologies, marketing strategies and new products in whichever field they operate, they help local companies and improve their standards as well,” he said.
Syed Qaiser Anis, president, Pakistan Business and Professional Council, Abu Dhabi, also welcomed this initiative, saying this is in line with the announcements made earlier to boost economic growth of Abu Dhabi.
“All sectors will benefit, especially general trading, services sector and those providing financial consultancies. Companies providing import and re-export without warehousing will also benefit as they can immediately buy and sell products. Plus, food and construction industries will also be beneficiary of this initiative,” he added.
According to Naveen Sharma, chairman, ICAI – Dubai chapter, cost of doing business will go down result of this initiative because companies will not only save on licence fees but will also save on compliance and other related costs.
“Dual licence will reduce accounting, administrative and operational costs across the board. Conducting business with one licence in free zone and mainland will also give companies flexibility and competitive edge in the market place. Overall, companies will be more productive and profitable,” Sharma added.
Sharma believes companies which import and sell in mainland as well as re-export will benefit the most as these companies trade both in mainland and in neighbouring countries.
“Food, textile, ship repair and petroleum sectors will all benefit with this welcome initiative. Companies will be able to plan better and overall their productivity will improve. The rating of Emirates on ease of doing index will definitely improve for better,” he added.
Surandar Jesrani, managing partner and CEO, Morison MJS Tax Consultancy, said dual licence gives companies competitive edge to bid and participate for the government projects and others for which operations in mainland is necessary.
“This initiative will boost foreign investment and create job opportunities for many professionals,” he said, adding that sectors such as FMCG, construction and infrastructure, manufacturing and trading located in the free zone shall benefit the most.
“When dual licensing is implemented, Abu Dhabi shall become more competitive as many foreign companies will consider to benefit from 100 per cent ownership rights and simple documentation will make business conditions lenient,” Jesrani added.