When it comes to setting up a business, the UAE is one of the best places in the Middle East to do so. It’s a global hub providing opportunities for multiple industries and nationalities. Its liberal, stable, business-friendly environment and numerous business promotion initiatives make it highly appealing to international investors.
You can set up your company in either a free zone or the mainland. Like many before you, you may be asking, ‘What is the difference between the two?’ Or, ‘How do I know which is the right choice?’
Both options have their positives, drawbacks and investment opportunities depending on your business and its needs. And in this article, we will try to help answer those questions. We will cover the following:
- • Mainland company: What is it?
- • Free zone company: What is it?
- • Mainland vs free zone: What’s the difference?
- • Advantages of a mainland company
- • Advantages of a free zone company
- • Working with Creative Zone
Mainland company: What is it?
A mainland company is simply an onshore entity registered with the relevant emirate’s government body. The Emirate’s Department of Economic Development (DED) issues its trade license. The fundamental feature of a mainland company is that there are no restrictions on its commercial activities. However, you require a local sponsor or a UAE national to be a partner in the company for some business activities.
Free zone company: What is it?
If you prefer to keep 100% ownership, the free zones are an excellent alternative to the mainland. The first free zone in the UAE opened in the 1980s, and they have grown in size and scope since then. Currently, there are over 45 free zones across the country. Each free zone is managed and administered by its own regulatory authority and functions under its own laws and regulations.
Mainland vs free zone: Whats the difference?
So what is the difference between mainland and free zone? The jurisdictions are highly varied, and each one serves a distinct corporate structure. Below are the key differences that can help you decide which one is right for you.
Ownership: Until recently, as a foreign investor establishing a company on the mainland, you were only allowed to own a maximum of 49%, while the remaining 51% had to go to the Emirati sponsor. However, the UAE government now allows 100% foreign ownership for selective business activities registered on the mainland. Free zones have no such restriction nor need for local sponsors as you enjoy complete ownership from day one.
Business scope: The fundamental difference between mainland and free zone companies is that a free zone company cannot do business outside the free zone without the help of a local agent. This restriction does not apply to mainland companies who have permission to operate everywhere in the UAE.
Workspace: A mainland company must have a minimum of 200sqft for a physical office. After securing the required space, the DED will issue a license for your company. It is not mandatory for free zone companies to ensure a physical location as many free zones allow companies to have virtual workplaces.
Visas: Mainland companies are not subject to any visa restrictions; however, the number of visas issued is dependent on the workspace area. So if your company requires additional visas, it first has to acquire or rent a larger workspace. Unlike mainland companies, free zone companies do have restrictions on the number of visas they can apply for. Typically, the number of visas available depends on the free zone regulations and ranges from 1 to 6.
Free Zone Business setup approvals: You will require government clearance from several government agencies for a mainland company. These include the Department of Economic Development, the Municipality of Dubai, the Ministry of Labor, etc. In comparison, each free zone follows its own laws and regulations for any new businesses established inside its jurisdiction. Furthermore, you do not need permission from non-free zone government authorities or agencies to start your company in a free zone.
Company audit: It is mandatory for all mainland companies to prepare a financial audit at the end of each fiscal year. However, not all free zones require companies to process their yearly financial audits. Only free zone companies like FZE and FZCO need to conduct a year-end audit.
Advantages of a mainland company
Below are some of the advantages when you set up a mainland company:
• Freedom to conduct business throughout the UAE without restrictions
• 100% exemption from corporate and personal taxes
• Allowed 100% repatriation of profits and capital
• Potential bid and work on UAE government contracts
• No constraints on the number of visas
• Can set up their office location anywhere in the registered emirate and establish multiple company branches creating a solid presence in the local market
• Unrestricted access to the global markets
Advantages of a free zone company
The following are some of the benefits of establishing a company in a free zone:
• 100% ownership without the need of UAE sponsor
• Quick and easy company formation
• 100% repatriation of capital and profits
• 100% exemption from import and export duties
• Shareholders’ details remain private to the public
• Relatively easy recruitment policy
• Free zones provide business advice and networking support
Working with Creative Zone
Hopefully, you have a better understanding of the differences and advantages of a mainland and free zone company. Which option is right for you is based on the type of business and activities you intend to pursue. Everything comes down to your needs and goals.
Whether you start a business on the mainland or in a free zone, one thing is sure; Creative Zone can help you set up your business. Our qualified and expert professionals will handle all government-related work, ensuring a smooth setup.
Creative Zone is UAE’s oldest and most trusted business setup expert, having assisted over 44,000 entrepreneurs in successfully establishing their businesses since our inception in 2010.
We specialise in delivering solutions that best fit your needs when starting a business by providing quick, dependable, hassle-free, and experienced assistance.
Assisting your business setup in Dubai is only the first step. We also provide a wide range of services, including tax preparation, legal advice, and human resources management.
The benefits don’t end there. When you become a client of Creative Zone, through our networking tool, CZ Connect, every client gets access to a thriving community of fellow entrepreneurs. This allows you to interact, network, and develop significant relationships with the region’s larger business community.
Take advantage of our free consultations today and get unbiased advice on UAE business formation to find the best fit for your needs.