UAE businesses sometimes want to move from a mainland licence to a free zone licence — to access 100% foreign ownership, reduce costs, or change their business model. This is possible but involves several steps.
Can You “Convert” a Mainland Company?
There is no direct conversion mechanism to transfer a mainland LLC into a free zone company. Instead, you must: incorporate a new free zone company, transfer business activities and clients to the new entity, and deregister the mainland company. This is effectively a migration, not a conversion.
Step 1: Incorporate the Free Zone Company
Set up a new free zone company with the target free zone. Choose the same or expanded activities as your mainland licence. IFZA, DMCC, or RAKEZ are popular choices for this migration due to low incorporation costs.
Step 2: Migrate Contracts and Banking
Notify all clients and suppliers of the entity change. Update invoicing to the new free zone company name and bank account. Transfer contracts to the new entity through novation agreements (requires client consent). Update your UAE bank accounts — open a new corporate account under the free zone company name.
Step 3: Transfer or Re-Sponsor Employee Visas
Employee visas sponsored by the mainland company must be cancelled and reissued under the free zone company. This involves: cancelling existing visas (with employee consent), applying for new entry permits from the free zone, completing medical fitness and biometrics, and stamping new visas. Allow 4–8 weeks for the full visa transfer.
Step 4: Deregister the Mainland Company
Once all activities are transferred, apply to the relevant DED (Department of Economic Development) to cancel the mainland trade licence. Settle all outstanding fees and taxes, close the mainland bank account, and submit the licence cancellation form with supporting documents.
Tax Implications
Under UAE Corporate Tax, migrating from mainland to a free zone does not itself trigger a taxable event. However, any assets transferred between entities at non-arm’s-length prices may trigger transfer pricing adjustments. Consult a UAE tax advisor before migrating.