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When it involves starting a business, the UAE is one of the top locations in the Middle East. Mainly due to its preference. As a significant world leader in the movement of people and goods, it connects businesses. Either directly or indirectly in various sectors and from countries around the world. Changing economic trends have been a common concern of the people from its beginning. The inspiring story about the UAE is not finished yet. Every day the country continues to improve its innovative thinking and start-up developments.
If you want to establish your company, you may choose between a free zone or a mainland setup. First of all, it is totally reasonable for you to ponder convertible with some questions. Like
“What are their main differences?” or “How am I supposed to pick the best for me?”
Every option has its own pros and cons, as well as investment opportunities. Nonetheless, the purpose of this article is to answer those queries.
Mainland Company? What Is It?
A mainland company is an onshore entity that the local government authority registers. The emirate issues its trade license under the Department of Economic Development (DED). A main feature of a mainland company is the absence of any activity restrictions. However, for certain business activities, a local sponsor or a UAE national must be a partner.
Free Zone Company? What Is It?
If you do not want to share property, free zones are a good suggestion. This is of course an alternative form to the mainland. The first free zone in the UAE was set up in the 1980s. From then on, the number of zones and their respective variations has increased significantly. There are currently over 45 free zones in the country. They all have their own authorities and operate under their different laws and regulations.
Mainland vs. Free Zone: What’s the Difference?
So, what differentiates a free zone from the mainland? They are separate jurisdictions and are therefore considerably different. Containing their own unique corporate structure. To help you with your choice, here are the main differences, which you need to know:
Ownership
Foreign investors setting up a company in the mainland were allowed to have only a maximum of 49% share of the company. While the remaining 51% went to the Emirati sponsor. Today, however, the UAE government has authorized 100% foreign ownership of selected types of businesses. They are registered on the mainland. On the contrary, free zones do not place such a limitation. Thus, they allow full ownership from the outset.
Business Scope
The main difference between the two is their range of activities. Free zone companies can only deal with clients from their zone and need the services of a local agent to do so. While mainland companies can work genuinely all over the UAE.
Workspace
A mainland company must have at least 200 sq. ft of physical office space. This is a must before the DED grants you your license to trade. On the contrary, as many free zones allow virtual offices. Free zone companies are not required to have a physical address.
Visas
Mainland companies do not face any visa restrictions. However, the number of visas issued is proportional to the workspace area. This implies that if you need more visas for your business then you must secure or rent a bigger office. In contrast, free zone companies are generally subject to visa restrictions. The limitations usually depend on the free zone regulations and range from 1 to 6 visas.
Free Zone Business Setup Approvals
Mainland companies require a permit from a number of entities. Like the Department of Economic Development, the Municipality of Dubai, and the Ministry of Labor for government clearance. On the flip side, the advantage of each free zone is that it is run by its own set of legislation and rules. This means that you do not require approval from other government agencies. Those are not free zones to set up your business in.
Company Audit
Every year, mainland companies must prepare a financial audit. This reviews each branch and office’s financial activity for that year. However, not all free zones require annual financial audits. Only specific free zone companies, such as FZE and FZCO, must conduct a year-end audit.
Mainland Company Advantages
Here are a few features of a company that works on the mainland:
- Unrestricted Business Operations: You may do business anywhere in the UAE. But without any restrictions.
- Tax Exemptions: You benefit from a 100% waiver of both corporate and personal taxes.
- Profit Repatriation: You have the right to fully repatriate profits and capital.
- Government Contract Opportunities: You can bid. And also enjoy the contract that you have with the UAE government.
- Visa Flexibility: There are no restrictions in the number of visas that you can get.
- Location Freedom: You can set up your office wherever the registered emirate allows. Create several company branches which can be a strengthening factor for your local market.
- Global Market Access: You will have uninterrupted access to international markets.
Free Zone Company Advantages
Here are the main benefits of establishing a free zone company:
- Full Ownership: Without the need for a local sponsor, you can enjoy 100% ownership.
- Efficient Company Setup: The formation of a company is fast and uncomplicated.
- Capital Repatriation: You will be able to repatriate 100% of both capital and profits.
- Duty Exemptions: You will not have to pay any duties on imports and exports.
- Privacy for Shareholders: Your shareholders’ privacy will remain as it is. Thus, will not be disclosed to the public.
- Simple Recruitment Policies: Hiring employees is not hard.
- Business Support: Free zones offer business advisory services and networking opportunities.
Mainland Areas in Dubai
- Deira
- Bur Dubai
- Business Bay
- Al Quoz
- Sheikh Zayed Road
- Jebel Ali Industrial Area
- Dubai Healthcare City
- Dubai Media City
- Dubai Design District and more.
Free Zone Areas in Dubai
- Emirate Tower District
- Jumeirah Lake Tower
- Dubai Knowledge Park
- Jebel Ali Free Zone
- Dubai World Trade City
- Duabi Internet City
Final Thoughts
The UAE is, to my mind, a very promising place for innovative companies and business. For the mainland, easy access to the local market and the permission to bid for government contracts is amazing. On top of that, the tax exemptions and the profit repatriation regulations render a very attractive financial setting.
Nevertheless, free zones are also regarded as a good choice. Especially, for those ambitious people seeking complete ownership without the hassle of a local sponsor. The advantages of simple company creation and the privacy that is granted to shareholders.
If the right choice made between them is, it all boils down to fulfilling individual objectives. But specific benefits of each option can take a major part in the success of the company.
