Dubai offers unprecedented opportunities for entrepreneurs and investors in its rapidly developing business environment. Dubai businesses are established in one of three primary jurisdictional legal structures: Mainland, Free Zone, and Offshore.
The mainland and free zone structures in the United Arab Emirates have their own distinct features and rules as well as opportunities for investment.
In this article, we examine the basic differences and characteristics of these two structures mainland and free zone to make the right choice for your business. Choosing between the UAE free zone or the UAE mainland has lasting impacts on your business in the future.
A single mistake in the business setup process can cost you thousands of Dirhams. Now Consultant can help you with the smooth company setup process in the UAE.
What Is a Free Zone Company?
The Free Zones in UAE are self-regulated zones allocated in each Emirate with a governing body, the Free Zone Authority. They work under a distinctive legal framework from the rest of the UAE’s jurisdictions.
Free Zones present very competitive offers to investors such as full ownership of the foreign entity and tax-free jurisdiction, making it an attractive option for company setup in the region.
What Is a Mainland Company?
The UAE mainland company is officially registered with the Ministry of Economy and it is supervised by the Department of Economic Development (DED). The formation of a mainland company requires a UAE resident sponsor.
Mainland companies have no defined scope of activities and can conduct business both within and outside the UAE. A trade activity type demands a UAE national to possess 51% of the company, and an expat owns the remaining 49%. However, a service activity type allows foreign nationals to have full 100% possession.
The Difference Between Free Zone And Mainland Business:
| Characteristics | Mainland Company | Free Zone Company |
| Local Ownership | Mainland companies are required to have 51% local ownership; however, you will have total control over the company. | It allows full ownership without a local sponsor, unlike other businesses in the UAE. |
| Flexibility in Trade | It can trade across all the UAE cities and internationally with other foreign companies. | Free Zones allow full free trade with countries outside the UAE and other Free Zones. |
| Physical Office Space | It must be registered with a physical office and obtain all the other necessary approvals they need | The other companies have the freedom of having a physical or virtual office depending on the nature of their business. |
| Visa Restriction | There are no limitations on number of visas. | There is a restriction on the number of visas, which is between 6-7 only |
| Audit of Company | A financial audit is mandatory for a mainland company. | Some Free Zones may not require a financial audit, others have to follow rules set by their relevant regulating body. |
| Minimum Capital Requirements | Mainland Company establishment costs vary based on the nature of the company and the services it offers. The minimum cost ranges from AED 20,000-25,000 | The minimum capital requirements depend upon your activities, license type, and the chosen Free Zone starting from a minimum of AED 5,000. |
| Company Setup Approval | Business in the mainland must be approved by the Department of Development, the Labour Ministry, and the Department of Naturalization and Residency to be duly registered | Business in Free Zone does not require any external approval but it needs approval from the relevant Free Zone Authority. |
Benefits of Mainland Company Setup?
The following are the benefits of establishing a mainland company in the UAE:
- The right to do business throughout the UAE without any restriction.
- 100% freedom from corporation and personal taxes.
- 100% entitled to repatriate profits and capital.
- Eligible to submit quotations and obtain UAE official contracts.
- Availability of Unlimited visas.
- Permission to have its office in the Emirates where it is registered
- Can register multiple company branches across the country
- Unlimited access to the global market
Now Consultant can help you with company setup in the mainland along with providing suitable sponsorship for your business setup in the UAE
Benefits of Free Zone Company Setup?
The benefits of setting up a company in free zones include:
- 100% ownership and no need for a UAE sponsor.
- The establishment of a company is quick and easy.
- Repatriation of 100% capital and profits.
- 100% duty-free import and export.
- Details of shareholders are kept private to the public.
- The workforce is relatively easy to recruit
- Free zones provide free business advice and networking support.
If you want to invest in the Free zone in the UAE, the experts at Now Consultant can help you choose the best business activity and the relevant free zone to grow your business.
How We Can Help You?
Your business in the UAE is likely to perform well depending on its jurisdiction. Now Consultant, a leading business setup firm, helps you to choose either the mainland or free zone that is best for you depending upon your business type and your chosen activities.
Our professionals will help you all the way in the company process in compliance with the relevant authorities; hence no mistake will be made that may lead to an increase in business setup cost or expenditures.
FAQs:
Can Free Zone Companies Do Business in the Mainland?
No, a Free Zone company is not permitted to operate any business activity directly in the mainland of the UAE. However, it requires specific licenses and documentation from DED to do business in the mainland.
Is Free Zone Company Better Than Mainland?
Free Zone companies are the top choice for foreign as investors can offer their services to the global market and inside the free zones while availing the benefit of the zero tax policies, while the Mainland is favorable for multiple visa options in the UAE.
Which Is Cheap: Free Zone or Mainland?
Free Zone company setup is cheaper than Mainland if you have limited business activities and a few members of working staff; however, the cost increases with the addition of your activities, business type, and your chosen Free Zone jurisdiction.
