When it comes to establishing a business in the United Arab Emirates,
investors from all over the world have a wide range of objectives and
preferences. Finding the most suitable and investor-friendly location in which
to launch a business is always a priority. One of the reasons why the United
Arab Emirates is regarded as a commercial hub is the number of various types of
business opportunities available to people with a variety of interests. The
United Arab Emirates offers a diverse range of business prospects to foreign
investors, including mainland and free zone opportunities. As a result, you are
faced with the decision of whether to go to the free zone or the mainland.
Both have their own set of advantages and disadvantages, as well as their own
investment possibilities, and both are intended to appeal to different types of
investors, which is why they are compared. It is entirely depends on the type of
activities and business you desire to engage in whether you choose a mainland or
a free zone structure. Put another way, if you want to conduct business in the
United Arab Emirates, you must choose a mainland structure; however, if you want
complete ownership and control over your company's operations, a free zone
configuration should be your first option.
As defined by the United Arab Emirates, a Mainland Firm is an inland corporation
that can operate in the local market as well as outside of the country.
Businesses on the Chinese mainland have complete flexibility in how they conduct
their operations when they hold commercial and professional licenses. An
in-country sponsor or an Emirati national is required for the establishment of a
mainland business in Dubai, and the typical ownership structure of an Emirati-owned
mainland business in Dubai is that the UAE national Sponsor holds 51 percent of
the company and the Foreign Shareholders (or their affiliates) hold the
remaining 49 percent.
Mainland corporations provide bespoke legal arrangements to international
investors and local sponsors, with the local sponsor receiving an annual fee or
a share of sales and earnings. When a foreign investor acquires entire control
of a company, the local partner is excluded from participation in the day-to-day
operations. Dubai's Department of Economic Development (DED) is in charge of the
registration and licensing of mainland firms, as well as the enforcement of
commercial regulations and the protection of consumers.
Unlike other legal entities, the Free Zone Company is a separate legal entity
that works under its own set of laws and regulations. Each free zone has the
ability to conduct business both within and outside of the United Arab Emirates.
When comparing mainland and free zones, the most significant distinction is that
a free zone company cannot conduct business in a non-free zone without the help
of a local agent; in contrast, a mainland corporation can conduct business in
any location in the UAE. In Dubai, there are a number of free zones to choose
from. The reasons why foreign investors select free zone projects are numerous,
and include a number of advantages such as complete ownership rights, access to
world-class infrastructure, asset protection, and tax benefits.
Reasons to establish a business in the Free Zone:
If you wish to create a business in the United Arab Emirates, there are various
advantages to choosing a free zone.
It is simple to establish a no-fee zone: The process of establishing free zones
is really straightforward and straightforward. Because the type of the business
and the specific free zone are important factors in the application process, it
is important to understand the steps involved. Investors will be required to
provide a few pieces of documentation, such as copies of their passports and
proof of their business registration. The entire process will take around one
week to finish.
Duty-free shopping in a free zone: The tax system is by far the most enticing
argument for locating a business in a free zone. The development of a free zone
results in the elimination of all company and personal taxes, as well as the
exemption of 5 percent from VAT. Not only that, but the free zone firms also
provide tax exemptions on imports and exports, as well as the freedom to conduct
business with no restrictions on the currency used.
Ownership: Establishing a business in a free zone allows foreign investors with
complete ownership of the company they have established. The majority of foreign
investors who wish to establish a business on the UAE's mainland will require
the assistance of a local sponsor. The process of doing business in the United
Arab Emirates: Businesses in free zones are not permitted to trade directly in
the UAE's domestic market; however, this has been easily corrected in recent
Your company can conduct business with a distributor who has been designated by
the local government and whose function will be to offer your goods and services
on the local market in exchange for a fee. Begin by establishing a free zone
business, and then extend your free zone company throughout the United Arab
Emirates. These branch offices can be used to sell your goods and to establish a
presence in the UAE's mainland business community.
Assistance and support: The officials of the free zone are available to assist
you at any time during and after the formation of your business in the facility.
Many free zones will assist you in obtaining visas for shareholders as well as
their dependents, such as spouses or other workers. Most free zones also aid
with the opening of corporate bank accounts, as well as providing advise on
which bank is the best fit for your needs and arranging meetings with bank
representatives in-branch on your behalf.
Currently, free zones are expected to provide business advise and networking
assistance, as well as connections to various startup centers and growth
programs, in order to aid in the success of newly established businesses.
Privacy: Finally, free zones are well-known among investors who value their
personal privacy due to the fact that company ownership and other corporate
information, such as shareholder details, are never made public.
Differences between Freezones and Mainland Law
The mainland is the most popular option for setting up a business in the UAE
because of the following benefits:
Mainland companies in the UAE are exempt from corporate tax, The minimum capital
needed for establishing a Mainland Company is 0%, Mainland corporations can do
business in Dubai or the UAE with other mainland companies and have the freedom
to operate in any region of the UAE or beyond.
Because free zones are often restricted to conducting business exclusively
within their particular free zones, this feature set gives them an advantage
over free zone companies, and Mainland enterprises, unlike those in free zones,
have a variety of possibilities for conducting business. As far as mainland
business is concerned, there are no restrictions.
They can provide a wide range of services to the UAE economy.
Mainland enterprises can choose any location in the UAE for their office. This
feature not only allows them to conduct business with the local market, but also
allows them to open various branches of the company, allowing them to create a
strong presence in the UAE, Mainland corporations are allowed to work on
government contracts, whereas free zone enterprises are only allowed to work on
private commercial projects, There are no restrictions on the number of visas
that can be issued under a mainland license.
However, obtaining permits for mainland companies will be totally dependent on
the amount of office space purchased, There are no currency restrictions in
Dubai for mainland companies, Capital and profits can be repatriated in their
whole and The registration process for mainland businesses is simple and does
not require a yearly audit.
For freezones the laws are different and can be divided into Advantages and
Advantages are, foreign investors are offered complete ownership, Complete
capital and profit repatriation, completely free money transfers, Import and
export tariffs are completely waived, in comparison to forming a company outside
of a city, forming a firm in a free zone takes less time, A cost-effective staff
and a reasonably simple recruitment process and, A 25-year leasing plan,
warehousing facilities, and the possibility of production and assembly sites,
among other things.
Disadvantages are that, corporation operating in a free zone is not permitted to
trade directly with the UAE market and only locally authorized distributors can
start a free zone company's local business.
Licensing requirements for the freezone and mainland set up
In order to receive a license, a mainland company must first obtain routine
government clearances from the Department of Economic Development, the Labor
Ministry, and the Ministry of Immigration.
The Knowledge and Human Development Authority (KHDA) must approve educational
licenses, the Dubai Health Authority (DHA) must approve medical licenses, and
the Food Department of Municipality must approve all food licenses.
However, most free zone enterprises deal in imports and re-exports. In this
case, the corporations are not required to seek external permission before
issuing a license. They can only ask for permission from outside authorities if
they want certain services.
As a result, enterprises must choose between locating on the mainland or in a
free zone. Simply put, the answer is largely depending on your intended
activities and business. You can do business in the UAE via the mainland, but if
you want complete ownership and control over your business, a free zone is the
- The difference between Mainland and Free Zone for business setup in UAE
| MBG (mbgcorp.com)
- Free zone or Mainland – Which one should you choose? - Business Setup In
Dubai Mainland (ebmsbusiness.com)
- Mainland vs Freezone business set up in the UAE - Dubai & Abu Dhabi |
PRO Partner Group