1 Trade Confinement

The first and foremost problem of starting a business in Dubai

as a foreigner is the free zone confinement. There are over 20
different free zones in Dubai. All these places don’t have any
income tax, and registration of a business is easy here. The
rules and regulations are greatly relaxed making it almost the
perfect place to conduct business. However, the downside of
such free zones is that you will be limited to this particular
zone for good. If the objective of the foreign investor is to
slowly expand the business and move to the other parts of
Dubai then they cannot take advantage of the free zone. Any
business established inside the free zone shall remain within
the zone. They are not allowed to expand their business in
other markets of the UAE nor can they cater to the needs of
other customers of Dubai living in other areas. This becomes a
huge stumbling block for companies that have great growth
potential. They can only trade in the mainland (local market)
through a registered distributor in the mainland.

Type of company

Another huge problem of operating in the free zone is that

companies are not allowed to establish any kind of companies
within these free zones. There are restrictions and particular
requirements for setting up companies within the free zone.
Each free zone has individual type of business which is the
only type of business that is permitted to be established in
that region. In simpler terms, if a particular free zone allows
technology then no other type of business, let us say export
and import, cannot be established in that particular zone. This
means, that no matter how much the demand for that company
or services are there, unless the zone matches the business
type, a foreigner unable of starting a business in Dubai and in
particular area. This becomes a big problem for foreign
investors as it takes away their chance of seizing the market
in a specific area.

 No Branch Offices

Branch offices are a common form of business entity that most

foreign investors look to establish when working in a different
country. It basically promotes the parent company and
connects the local business with that of the parent company.
However, in Dubai, this certain thing is not allowed. According
to the Free Zone rules nobody is allowed to establish a branch
office. If they do start a branch office then it becomes a
separate entity and completely different from the parent
company. This puts the foreigners at a huge problem because
a lot of the times they cannot fully operate or establish a new
office for starting a business in Dubai. Rather they would
prefer to set up branch offices and keep their activities in the
new country to a minimum level. However branches can be
opened in other northern emirates free zones like Fujairah.

LACK OF MAXIMUM POWERS TO DO TRANSACTION

Government institutions in the UAE hardly and rarely do

business with a free zone based company, they prefer a
mainland based company because a mainland company has
the presence of a UAE National.

POSSIBILITY OF GETTING A BANK ACCOUNT

It is stressful and time consuming to get a bank account with
a free zone based company compare to a mainland based
company.