Business Setup, Free Zone, Home, Mainland

What is the difference between free zone and mainland UAE

freezone company setup image

Different investors from all over the world have different aims when it comes to set up business in Dubai. The most common reason that UAE is considered a business hub is because of the different and multiple business opportunities available for different people. The two options available for company setup Dubai is the mainland and the free zone area. Now arrives the dilemma of which one is the best and which option should be chosen.

Both have certain plus points, some drawbacks, and various investment opportunities. A close analysis is required when selecting the option, so here is a guide for that.

free zone and mainland

What Is a Mainland Company?

The inland company which can conduct its business activities in the local market is a mainland company. In the case of commercial and professional licenses, these types of companies have the freedom to carry out their business activities. For a company set up Dubai, a local sponsor or a UAE national is required. The foreign shareholder holds 49% share in the company and UAE national holds 51% share in the company. Here 100% control of the company is with the foreign investor and there is no involvement of local sponsor in the day-to-day operations of the business.

Advantages Of Setting Up Mainland Business in Dubai

  • Mainland company in Dubai is given exemption from corporate tax.
  • For setting up a mainland company there is a 0% minimum capital requirement.
  • Unlike the free zone business setups, mainland companies have much scope of diversity. It has various options for conducting business activities.
  • The mainland companies can have business relations with other mainland companies in Dubai or UAE and can conduct the business in any part which is rarely possible free zone setups are restricted to perform their business activities in their allotted free zone only.
  • The feature of mainland companies that it can choose their office location at any place in Dubai allows them to have the opportunity of dealing not just the local markets, but also, they can establish multiple branches of the company. This will enable it to hold a large presence in use.
  • Free zone set up companies are granted permission to carry out only private commercial assignments whereas mainland companies can carry out governmental contracts also.
  • There is no restriction on the usage of currency for mainland business in Dubai.
  • Full repatriation of capital and profits are permissible.
  • The registration process for mainland companies is very easy and simple. Also, there is no requirement of yearly audits.
  • There is no barrier on the number of visas.

What is a Free Zone Company?

It is a type of business entity that is independent and has its own unique set of rules and regulations. Every free zone has permission to operate its activities either outside use or inside the free zone. The difference that arises based on functionality that free zone business setup cannot conduct its operations in a non-free zone without the support of any local agent whereas the mainland company can conduct its activities anywhere. There are so many free zones in Dubai and the main reason why investors look for a free zone is that it provides complete ownership benefits.

Reasons For Setting Up Free Zone Business in Dubai

  • Setup In the Free Zone Is Easy

The free zone business setup is not a complicated procedure. The process of application is directly dependent on the nature of the business and the free zone that you have chosen. Only certain necessary documentation is required such as copies of passport and business paperwork. The whole process takes about a week and the work is done.

  • Tax And Duty

This is the most fascinating reason due to which people set up business in the free zone. Free zone business setup offers a 0% personal and corporate tax, VAT exemption which is 5% currently. Also, this type of setup offers an exemption on export and import tax and the business can be conducted without any currency restrictions.

  • Ownership

When we set up business in a free zone it enables foreign investors to complete their company ownership. A local sponsor is required to conduct business.

  • Conducting The Business Within the UAE

It is said that the fee zone is not permitted to trade in using the local market, however, this situation can be tackled. The business can be conducted with a local distributor which indirectly enables you to get access to the local markets and in return, you just need to pay a sum of money as his fees or services.

  • Support and Assistance

Free zone setup is preferred because it provides support during the company is set up and after it is set up. They tend to provide assistance by the opening of bank current accounts, give advice and also help while applying for visas. It is also a helping hand in providing networking support to different star-tups and several growth initiatives to the new businesses to achieve success.

Some Important Advantages of Free Zone Business

  • Foreign investors are offered complete ownership.
  • Complete free transfer of funds is there.
  • They are fully exempted from import and tax duties.
  • A complete and ensured repatriation of capital and profits.
  • The formation of a free zone company is easy and immediate as compared to incorporation anywhere outside in the city.
  • There is a relatively easy recruitment policy and the workforce is economical.

So basically, the choice is based on the research work keeping in view the advantages and disadvantages attached to the business options.

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