Freezone
- Ownership: 100% foreign ownership allowed. No need for a local sponsor.
- Tax Benefits: Enjoy tax exemptions on import/export duties and personal or corporate taxes.
- Trade Restrictions: Limited to conducting business within the Freezone or internationally. Trade within the UAE Mainland requires a local distributor.
- Setup Cost: Generally lower initial costs with various business setup packages.
- Regulations:Streamlined regulations and processes with quicker setup times
Mainland
- Ownership: Requires a UAE national to hold at least 51% of shares (for certain business activities, 100% foreign ownership is now allowed in specific sectors).
- Trade Flexibility: Freedom to trade anywhere in the UAE without restrictions.
- Taxation: Subject to UAE’s VAT policies, but corporate taxes are generally low.
- Setup Cost: Higher initial setup costs compared to Freezone, with more regulatory requirements.
- Business Scope: Access to lucrative government contracts and more significant market opportunities within the UAE.
When considering business setup, the UAE stands out as a premier destination in the Middle East, offering a global hub brimming with opportunities for diverse industries and nationalities. Renowned for its progressive, stable, and business-friendly environment, along with various business promotion initiatives, the UAE holds immense allure for international investors.
Deciding between establishing your company in a free zone or on the mainland can be a significant choice, leading many to inquire about the distinctions between these options. Understanding the unique features, advantages, disadvantages, and investment prospects of both free zones and the mainland is key to making an informed decision tailored to your business requirements.
This article aims to address these queries comprehensively, providing insights into the essential aspects to consider when selecting the most suitable setup option for your business needs.
Table of Content
- Free zone company: What is it?
- Mainland company: What is it?
- Mainland vs free zone: What’s the difference?
- Benefits of a Free zone company
- Benefits of a Mainland company
- Working with Proactive Zone
Free zone company: What is it?
Choosing a free zone allows you to own your business entirely, unlike the mainland. The first free zone in the UAE started in the 1980s and has since grown. Currently, there are over 45 free zones in the country, each managed separately with its own rules and laws.
Mainland company: What is it?
A mainland company is essentially an onshore entity registered with the government authority of the specific emirate. The trade license for this entity is provided by the Department of Economic Development (DED) of the emirate. The primary characteristic of a mainland company is the absence of limitations on its commercial operations. However, for certain business endeavors, it is essential to have a local sponsor or a UAE national as a partner in the company.
Mainland vs free zone: Whats the difference?
What sets mainland and free zone apart? Each comes with distinct corporate structures and varied regulations. Here are key contrasts to help you determine the right fit:
Ownership: At one point, foreign investors in mainland companies could own up to 49%, with Emirati sponsors holding the rest. Now, certain mainland businesses allow 100% foreign ownership. Free zones grant full ownership from the start without such restrictions.
Business Scope: Unlike mainland companies that can operate anywhere in the UAE, free zone businesses must work within their zone unless using a local agent to go beyond.
Workspace: Mainland ventures need a minimum 200sqft office, after which they receive a license. Many free zones offer the option of virtual offices, making physical spaces optional.
Visas: Mainland companies determine visa numbers based on office size, with larger areas accommodating more visas. Free zone companies face limits, typically from 1 to 6 visas, based on zone regulations.
Setup Approvals: Establishing a mainland company involves clearances from various government bodies like the Department of Economic Development. Free zones operate under their laws, requiring no approvals from non-free zone authorities to start.
Company Audit: Mainland firms must conduct yearly financial audits. However, not all free zones mandate this, with only specific entities like FZE and FZCO needing year-end audits.
Benefits of a Free zone company
Here are the advantages of setting up a company in a free zone:
- Complete ownership without a UAE sponsor required
- Quick and simple company formation process
- Full repatriation of capital and profits
- Exemption from import and export duties
- Privacy of shareholders’ details
- Straightforward recruitment procedures
- Business advice and networking support provided by free zones
Benefits of a Mainland company
Here are the benefits of establishing a mainland company:
- Ability to conduct business across the UAE without limitations
- Full exemption from corporate and personal taxes
- Permission for complete repatriation of profits and capital
- Opportunity to bid and operate on UAE government contracts
- No limits on the number of visas
- Flexibility to choose office locations within the registered emirate and establish multiple company branches for a strong local presence
- Unlimited access to global markets
Working with Proactive Zone
We hope you now have a clearer grasp of the distinctions and benefits between setting up a mainland or free zone company. The choice that suits you best depends on your business type and objectives, aligning with your specific needs and aspirations.
Should you decide to establish your business in the mainland or a free zone, one thing is certain – Proactive Zone is here to support you in your journey. Our skilled professionals will manage all governmental procedures, ensuring a seamless establishment process.As the UAE’s most reputable business setup specialist
Proactive Zone excels in providing tailored solutions for your business launch – quick, reliable, and hassle-free.Our support extends beyond setting up your business in Dubai. We also offer diverse services including tax planning, legal counsel, and human resources management.
Take advantage of our complimentary consultations today to receive impartial guidance on UAE business formation, ensuring the optimal fit for your requirements.
