Dubai's One Free Zone Passport: a guide for business

Dubai’s dynamic economic landscape has long been defined by its specialised Free Zones, each a thriving hub for specific industries. However, expansion often meant navigating the costly and time-consuming process of securing new licences for each new location. The Dubai Free Zones Council (DFZC) has changed this with a landmark initiative: Dubai’s One Free Zone Passport.

This innovative framework allows businesses licensed in one participating Free Zone to seamlessly extend their operations without needing a new, separate licence. It represents a major step towards unifying Dubai’s free zone ecosystem, breaking down administrative barriers and fostering unprecedented flexibility.

This article will explore its benefits, explain how it works, detail the eligibility criteria, and outline the key tax and customs considerations.

Key highlights

Single licence, multiple zones: operate across various Free Zones with your existing trade licence, saving significant time and money.
Rapid expansion: cut down setup times from months to mere days, allowing you to react quickly to market opportunities.
Lower administrative burden: avoid duplicating legal, compliance, and incorporation procedures for each new location.
Operational flexibility: choose to set up a full branch or a permit for limited functions like storage, depending on your needs.
Access to shared infrastructure: utilise state-of-the-art warehouses, offices, and logistics hubs across participating zones.

How does the One Free Zone Passport work?

The initiative simplifies cross-zone operations by creating a unified regulatory framework. The system is built on mutual recognition and streamlined processes, all overseen by the DFZC.

Here’s a breakdown of the core components:

Primary zone: this is the Free Zone where your company was originally registered and holds its primary trade licence.
Secondary zone(s): these are the additional participating Free Zones where you can extend your operations using your primary licence.
Licensing Model: Businesses have two main options for setting up in a secondary zone:
- Branch setup: allows for full operational activity, mirroring the functions permitted under your primary licence.
- Permit: a more limited option, typically used for specific functions like warehousing or storage.
Due diligence recognition: a key feature is the mutual acceptance of compliance checks. Anti-Money Laundering (AML), Counter-Terrorism Financing (CTF), and Know Your Customer (KYC) verifications conducted by your primary zone are recognised by the secondary zone. This eliminates the need for redundant paperwork.

This streamlined approach has already proven its effectiveness. In a successful pilot, luxury brand Louis Vuitton established operations between Jebel Ali Free Zone (JAFZA) and Dubai World Trade Centre (DWTC) Free Zone in just five days.

Eligibility and key conditions

While the One Free Zone Passport is designed to be accessible, businesses must meet specific criteria to qualify. These conditions ensure regulatory consistency and maintain the integrity of the Free Zone ecosystem.

Activity alignment: your business activities must be identical across both the primary and secondary zones. You cannot use the passport to conduct new or different activities.
Ownership consistency: the company’s ownership structure, including all shareholders, directors, and managers, must remain the same across all operational zones.
Sector exclusions: the initiative is not applicable to certain regulated sectors. These currently include retail operations, financial institutions, and Designated Non-Financial Businesses and Professions (DNFBPs).
Physical office requirements: the passport cannot be used with virtual offices, flexi-desks, or hot desks in secondary zones. A physical presence, such as a dedicated office or warehouse, is required.
Employment limitations: employees cannot be freely transferred between zones. Staff working in a secondary zone must have the appropriate visas and labour approvals.

Tax and customs applications

Expanding under the One Free Zone Passport has important tax and customs implications that businesses must carefully consider to ensure full compliance.

Corporate tax

Your Free Zone Person status and eligibility for the 0% corporate tax rate remain tied to the conditions of your primary licence. You must continue to comply with all requirements under the UAE Corporate Tax Law, including maintaining audited financial statements. Any misalignment of activities or failure to meet substance requirements could put your preferential tax rate at risk.

VAT

Cross-zone transactions can trigger VAT implications. The movement of goods or services between a designated and non-designated zone, or between two non-designated zones, may be treated as a taxable supply. It is crucial to assess how your expansion impacts your VAT position.

Customs

Even when moving goods between two Designated Zones, customs documentation and procedures may still be required. Businesses involved in logistics and distribution must ensure they adhere to all customs regulations for transfers, re-exports, and storage to avoid delays or penalties.

The application process

The process for applying for the One Free Zone Passport is designed to be straightforward and efficient.

Submit your application: the first step is to submit an application to your primary free zone authority. This application should detail your existing licence, the activities you conduct, your intended operations in the secondary zone, and your facility requirements.
Regulatory review: the secondary free zone authority will review your application. They will verify that your proposed activities align with your primary licence and will adopt the due diligence data from your primary zone.
Approval and setup: once the secondary zone approves the application, you can commence operations. No separate incorporation or new trade licence is required, allowing you to get started almost immediately.

Practical example: a logistics company in action

Imagine a logistics and distribution company holds its primary licence in JAFZA, a major port-based free zone. To improve its air freight capabilities, the company wants to establish a warehouse near Al Maktoum International Airport, which is located in the Dubai South Free Zone.

Under the One Free Zone Passport initiative, the company can apply to the JAFZA authority to set up a warehouse in Dubai South. As long as the warehousing and distribution activities are identical to its primary licence, the application can be approved quickly. The company avoids the cost and delay of setting up a new legal entity and can begin its airport-adjacent operations within days.

However, if that same company wanted to open a small retail counter within Dubai South to sell goods directly to consumers, the passport would not apply. As retail is an excluded activity, so a separate licence would be required for that specific function.

How RHJ Accountants can help

The One Free Zone Passport is a powerful tool for ambitious businesses in Dubai, but navigating its requirements demands careful planning. From assessing tax implications to ensuring regulatory alignment, getting it right from the start is key to a successful expansion.

At RHJ Accountants, our team specialises in providing expert guidance to businesses operating in Dubai’s Free Zones. We can help you:

Assess eligibility: we’ll review your business structure and activities to confirm if you qualify for the One Free Zone Passport.
Conduct tax & customs reviews: our experts will analyse the corporate tax, VAT, and customs implications of your expansion to ensure full compliance.
Streamline your application: we can assist you in preparing and submitting your application to ensure a smooth and timely approval process.
Provide strategic advice: we help you choose the right operational model and develop a financial strategy that aligns with your growth objectives.

Ready to unlock new opportunities for your business in Dubai? Contact us today to learn how we can help you leverage the One Free Zone Passport for seamless growth.

Frequently asked questions

What is the One Free Zone Passport?

This is an initiative by the Dubai Free Zones Council. It allows businesses licensed in one participating Dubai Free Zone to expand operations into other participating Free Zones. The benefit being it can all be done under a single license, making regional growth much simpler.

Who is eligible to use the One Free Zone Passport?

Companies must have identical business activities and the same owners, directors, and managers in all zones. Sectors like retail, regulated financial institutions, and DNFBPs are excluded.

Can I have a virtual or flexi-desk office in the secondary Free Zone?

No. The One Free Zone Passport only permits operations with a physical office, warehouse, or dedicated facility in secondary zones.

Do I need a new trade license for each Free Zone?

No, eligible companies can use their primary Free Zone license to expand. And then setting up either a branch or operational permit in the secondary zone, streamlining legal and administrative processes.