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Should you start your company in Dubai Mainland or Free Zone?

Wednesday July 20, 2022

Dubai is one of the world’s most exciting and innovative business hubs. More companies are launching in this dynamic emirate than ever before. Last year an incredible 72,000 business licences were issued, marking a 69% increase from 2020.

If you are thinking about starting a company in Dubai, one of the most crucial decisions you will have to make is about your location. The two most popular options are the Dubai mainland and Dubai’s free zones. Dubai mainland will generally give you greatest flexibility, but in some cases a free zone might be more suited to your needs.

In this blog you’ll get a complete overview of the differences between mainland and free zone licences in Dubai. Read on to find out:

    • Dubai mainland vs a Dubai free zone – what’s the difference?
    • Who should start a mainland company?
    • Who should start a free zone company?
    • Steps to start a mainland company

Dubai mainland vs a Dubai free zone – what’s the difference?

There are several key differences between Dubai mainland businesses and Dubai free zone businesses.

A Dubai mainland business is a company that is located anywhere in Dubai’s territory, and it is licensed and regulated by the Department of Economic Development. To start a Dubai mainland company, you need to complete an approval process and get licences from the regulatory authorities. You are then permitted to trade with any business partner (and customers) inside the UAE or internationally.

A Dubai free zone business is a company that is located in one of Dubai’s many free zones. These are special economic areas that are geared up to meet the needs of companies working in specific industries. You receive authorisation from the individual free zone authority, and need to follow their rules. If you operate from a free zone, you can only trade within your own free zone and with companies and customers outside the UAE. While it is technically possible to trade with the mainland UAE from a free zone, it can be complicated and costly.

Some of the main differences between Dubai’s mainland businesses and Dubai’s free zone businesses include:

Scope of business

As noted above, free zone businesses are only allowed to trade with companies inside their free zone or outside the UAE. Mainland companies, by contrast, can trade with anyone, anywhere.

Flexibility

Generally speaking, starting a mainland company is the most flexible option. You can expand into other UAE markets, partake in different business activities and have freedom to move offices when you want. Free zones are quite a bit more restricted by comparison.

Office space

There are differences in the amount of office space that free zone and mainland companies need to rent. On Dubai’s mainland you will need to find office space of at least 140 square feet. By contrast, free zone companies normally have no minimum square footage for their offices – and virtual businesses are also allowed.

Visa eligibility

At a mainland UAE company, there are usually no restrictions on the number of visas your company can apply for – but the more people who work for your company, the larger the office space you must rent out. By contrast, in Dubai free zones, you typically get allocated between one and six visas as part of your application and then will need to apply for more (and may need to rent more office space).

Cost

The initial costs of launching in a Dubai free zone are often cheaper than on the mainland, although the end price really depends on your business..

Tax and incentives

Free zones in Dubai often have incentives to attract businesses, including 100% foreign ownership, no VAT, and no income tax.

Specialist or generalist

Generally speaking, free zones are highly specialist areas, with lots of companies in the same kind of industry working on similar kinds of products or services. This means that you could benefit from networking. On the mainland, you won’t necessarily be located in close proximity to other businesses in your sector.

Auditing and rules

Most mainland companies will need to be audited and will also have to follow the rules of the mainland authorities. By contrast, audits are not always mandatory in free zones and you just need to follow the free zone’s rules.

Who should start a mainland company?

If you would like to do business with companies and customers who are based mainland UAE, then starting a mainland company is definitely the best option. Although it is possible for free zone companies to trade with the mainland, it is much more complex, since they need to sign up with a local distributor to take care of deliveries or warehousing.

There are also a handful of restricted industries (including weaponry and military equipment) that you cannot be involved in if you are a free zone company.

Who should start a free zone company?

Free zones are particularly popular with entrepreneurs who wish to start services-based businesses. They are great for things like consulting and accountancy, as well as various creative industries. Free zone licences tend to be a little cheaper than mainland licences, which is why they are popular with startups and freelancers.

If you hope to trade with the mainland UAE, or expect to grow significantly in terms of employee headcount, free zone companies are not such a good option.

Steps to start a mainland company

If you would like to start a mainland company in Dubai, you will need to follow these six steps:

1. Identify your business activity
There are literally thousands of business activities you can choose from in the UAE. You need to select all those which apply to your company.

2. Choose your business structure and legal form
You need to decide on the legal form of your company such as sole establishment, limited liability company, public joint stock company, company branch, or a holding company (among other types).

3. Register your trade name
You need to choose a trade name which complies with the UAE’s legal business naming rules. Once this is complete, you will get initial approval for your business

4. MOA and LSA
For some types of mainland business, you need to complete and sign a Memorandum of Association or a local service agent agreement.

5. Select your business location
Next up, you need to find Dubai office space to rent which is suitable for the number of employees you have, and visas you are applying for.

6. Receive additional government approvals and collect your business licence
In certain industries, you may need to go through a process to receive government approvals. Once this is complete, you will receive your business licence and can begin trading.

Working with Creative Zone

At Creative Zone, we have helped tens of thousands of companies to successfully apply for business licences on both the Dubai mainland and its free zones. We have a comprehensive understanding of the market and legal issues and can give you advice on all aspects of business setup in Dubai. Our experts can help you choose whether a free zone or mainland company is right for you, advise you on office space, and support you through the licence application process.

We can also help you with several other services that will make running your mainland or free zone company even easier:

• Dedicated business setup manager
• Tax preparation
• Legal advice
• HR management
• Opportunities for business networking

Contact Creative Zone today to launch your business in Dubai.


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