The Abu Dhabi Department of Economic Development (ADED) announced on Saturday 15th September 2018 the launch of the first phase of its Dual Licenses Initiative (DLI). The initiative enables companies operating offshore in the Emirate’s free zones to carry out their commercial activities onshore in Abu Dhabi, Al Ain and Al Dhafra regions.
WHAT ARE THE CONDITIONS OF ELIGIBILITY?
To become eligible, free zone companies must present several documents in support of their application to the ADED to obtain an onshore license, which include a No-Objection Certificate from their Free Zone Authority. An undertaking that they do not have any branch in the Emirate outside the Free Zone, and a copy of the parent company’s free zone license. Once secured, the application can be submitted for an initial approval, following which the applicable fees can be paid and ultimately the license is issued.
Standard license fees apply to dual licenses, in accordance with the statement of the ADED. These fees may differ from one company to another depending on several factors including the type of the company and the activities carried out by it. Physical address and sign board are excluded from dual licenses, this reduces the company’s costs by 80% according to the ADED.
The timeline for issuing a license may vary according to the company’s activity. The ADED has advised that more than 90% of the activities follow a quick (almost immediate) path for license issuance. Other activities of a more technical nature will require certain government approvals which may take two to three working days for the license issuance.
WHAT IS THE IMPACT OF THE DLI ON THE ECONOMY AND LOCAL BUSINESSES?
The DLI is a positive step that encourages investors and businessmen to expand their investments in the Emirate and contribute to the advancement of economic development, growth and prosperity in the Emirate.
Offshore companies were previously confined to the limits of the free zone where they are established, and were only able to expand the legal and geographical scope of their businesses if certain conditions are met; such as (a) partnering with an onshore agent/company to secure a larger market, but at the cost of sharing profits, (b) applying for an onshore license which resulted in additional costs (like offices lease) and subject to the onshore regulatory and compliance restrictions. Practically speaking, a foreign investor owning a Free Zone company can expect, under the DLI, to start doing business onshore without partnering or sharing any profits.
The DLI, as announced, seems to form part of a larger economic plan that requires from investors/companies to reconsider their existing business structures and ventures, from a legal perspective, at both the internal and external levels.