If I want to sell a bar of soap in Australia, as a native I can go and register my new company and trade anywhere in the country, basically on the same day.
When coming to the UAE to sell my soap, registering a company becomes a slightly different affair. Due to the ownership restrictions for foreigners in the domestic market, as an Australian it really gave me no choice but to opt for a free zone license. It gave me the ownership that I wanted and a company to sell my soap.
Only once I am registered and my soap is on its way to the UAE does the ‘slightly different affair’ come to light. I come to know that as my company is registered in a free zone, the operation of my business in the UAE is limited to the free zone only. I cannot obtain shop premises or sell my product to the public outside in the Malls or local Souks. My goods are effectively stuck in a free zone and I am unable to reach 95 per cent of my target market.
The fact is that if you want to trade goods in the UAE domestic market, you must have a locally registered onshore company registered with a 51% local UAE partner. In my situation, the only way I can move my soap into the mainland market is by appointing a local trading company as an agent and paying the duty. I now sit in my FZ warehouse awaiting the agent’s schedule to take my goods at a much lower price than I had budgeted for now I’m selling as a wholesaler.
This seems insane, I have a license, but I cannot deal directly with my clients. There is no getting around this, it is the law. I am faced with extra expenses, longer shipment times, reduced profit margins. Not the dream start I had hoped for.
So where to go, what to do? Go back to Australia? But the UAE is still an emerging economy with compelling tax advantages . I want to stay.
We commonly forget that most of the world’s biggest companies have already gone through this process, but they are here today and are fully operational. The solution is simple: keep your commercial interests protected and engage a nominee to act as a local 51 per cent shareholder in an onshore UAE business.
Given the right structure, a nominee shareholding arrangement gives you both the de facto ownership you need and the company registration – in the right jurisdiction – to trade.
Right, now that I have my soap, 100 per cent of my target market accessible to me, so let’s get selling!