FREEZONE or MAINLAND: Where do I setup my business?

The United Arab Emirates is the ideal commercial centre for starting a business because it is a nation of entrepreneurs. Due to its strategic location in the world, UAE offers a large market to sell your goods and services in addition to tax benefits. Additionally, government support, technical developments, and an efficient infrastructure make setting up a business in UAE even more advantageous.

Entrepreneurs in Dubai, United Arab Emirates, have a choice between two basic setup options: Free zone and mainland. The one that’s best for you will depend on the size, location, and type of your firm. Each has its own advantages and restrictions.

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. A UAE mainland company is mainly characterized by the restriction-less trading opportunity. When an investor invests in a mainland company in the UAE, the company is authorized to trade in the UAE local market as well as outside UAE. However, you require a local sponsor or a UAE national to be a partner in the company for some business activities.

A free zone company is a company formed within a special jurisdiction that comes under a particular Emirate. Currently, there are over 45 free zones across the country. Free zone jurisdictions have their own regulations and have a government regulatory body called the Free Zone Authority. The Free zone Authority is in charge of trade license issuance. A UAE free zone is characterized by the benefits of 100% foreign ownership and tax concessions. A free zone company is authorized to trade only within the free zone and outside the UAE. 

Freezone or Mainland?

Authority: A special economic zone offering benefits to the region is the Dubai Free Zone. Independent governmental or non-governmental free zone authorities and entities oversee the Dubai Free Zone. Whereas, The Department of Economic Development (DED) oversees Dubai Mainland as an economic zone. Department of Economic Development is a governmental organization.

Ownership: Up until recently, if you were a foreign investor starting a business on the mainland, you could only own up to 49% of it; the remaining 51% belonged to the Emirati sponsor. However, for a few businesses incorporated on the mainland, the UAE government currently permits 100% foreign ownership. Free zones don’t have these limitations and don’t require local sponsors because you have full ownership from day one.

Scope of Business: 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 physical office must be at least 200 square feet in size for a mainland corporation. The DED will provide your business a license if you have acquired the necessary space. Since many free zones permit businesses to establish virtual workplaces, it is not necessary for free zone enterprises to provide a physical space.

Company audit: At the conclusion of the fiscal year, all mainland businesses are required to prepare a financial audit. Not all free zones, nevertheless, demand that businesses conduct their yearly financial audits. Only free zone businesses like FZE and FZCO are required to perform an audit at year’s end.

Visas: UAE mainland companies do not have any kind of restrictions connected with visa eligibility. The area of the workspace determines the number of visas issued. This means that, if the owner of the company requires more visas, he/she should have bigger work premises. Free zone companies have certain restrictions connected with visa eligibility. In ordinary cases, the number of visas issued ranges from 1 to 6. The UAE visa packages vary with the free zone jurisdiction. Issuance of more visas demands leasing out additional work premises.

Capital prerequisite: The minimum capital prerequisite of a UAE mainland company is determined by its legal structure. The minimum capital prerequisite of a free zone company is determined by the Emirate in which the company is formed.

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.

Cost: Free zone license packages are available at every Free Zone. You can get your free zone license for as low as AED 5,750. The total cost of starting a mainland business will depend on its size and requirements. However, as a general guide, you can obtain a Dubai mainland company license package for around AED 25,000. This is inclusive of visa allocation, office address, and any required medicals and tests.

Hope you got clarified about the major differences between a Mainland and Free Zone Company in UAE. We at Marwa Al Reyami assist investors and entrepreneurs set up their business dreams in both UAE mainland and Free zones. If you would like to know more about a mainland and Free zone company in UAE and their detailed business setup cost, procedures etc. feel free to contact our team of business advisors and consultants. We are ready to solve all your queries.