Establishing a company in the UAE has become increasingly straightforward. The UAE offers numerous advantages, including full ownership, well-defined business setup procedures, and specialized industry jurisdictions, making it an ideal destination for business startups. However, understanding the difference between mainland and freezone setups is crucial when deciding where to establish your business.
Companies have the flexibility to establish themselves in one of three primary jurisdictions: Mainland, Free Zone, or Offshore. In the following sections, we explore the key distinctions between mainland and freezone company setups to help you make an informed decision.
Both mainland and freezone structures in the United Arab Emirates (UAE) have their own advantages, disadvantages, and investment possibilities. The choice between the two depends on the specific activities and business you wish to engage in.
If you want to conduct business in the UAE, a mainland structure is necessary. However, if you prioritize complete ownership and control over your company’s operations, a free zone structure should be your preferred option.
However, the main difference between mainland and Free Zone companies is that a free zone company cannot operate in non-free zone areas without local agent, whereas a mainland company is free to trade wherever they want to in UAE, without a local agent, without limitations.
Table of Contents
What is a Mainland Company?
A mainland company in the UAE is an enterprise officially registered with the Ministry of Economy, overseen by the Department of Economic Development (DED). To establish a mainland company, a UAE resident sponsor is required.
Mainland companies are not restricted to specific business activities and have the freedom to operate both within and outside the UAE.
Shareholding structures vary between Trade and Service Activities. In Trade Activities, the UAE national shareholder typically holds a 51% ownership, while the expat shareholder owns 49%. In contrast, for Service Activities, foreign nationals can fully own the company, retaining 100% ownership.
What is a Free Zone Company?
Free Zones in the UAE are designated self-governing areas within each Emirate, overseen by a regulatory body called the Free Zone Authority (FZA). They operate under their distinct regulations.
These Free Zones offer attractive incentives and packages to investors, including full foreign ownership rights and a tax-free environment, making them an appealing choice for company setup in the region.
A Free Zone company refers to any business registered within the 40+ Free Zones in the UAE. Such companies are exclusively permitted to trade within the Free Zone and internationally, and they cannot engage in business on the UAE mainland.
Within a Free Zone, an investor can typically establish three types of business entities: Free Zone Company (FZC), Free Zone Establishment (FZE), or a Branch of an existing business.
Key Difference between Mainland and Freezone Company UAE
When starting a company in the UAE, you must abide by the rules and regulations of the respective authority. The free zone and the mainland in the UAE have different rules and regulations. They also come with different benefits.
Here are some of the difference between mainland and freezone company:
| Points | Mainland Company | Freezone Company |
|---|---|---|
| Local Ownership | It requires 51% local ownership, but you retain full control over the business. | Unlike regular businesses in the UAE, a Freezone company allows full ownership without the need for a local sponsor. |
| Trade Flexibility | A mainland company can conduct trade within any city in the UAE and also with foreign companies. | Freezone companies can trade freely with countries outside the UAE and with other Freezones, facilitating international business. |
| Physical Office space | It must have a physical office location registered with Ejari and obtain necessary approvals from other essential authorities. | These companies have the option of having a physical or virtual business location, tailored to their specific operational needs. |
| Visa Eligibility | There are no restrictions on the number of visas allowed, but the company must expand office space if it requires additional visas. | There are some restrictions on the number of visas a Freezone company can apply for, usually limited to 6-7 visas. |
| Company Audit | A financial audit is obligatory for a mainland company. External Approvals: Setting up a mainland business requires approvals from various UAE authorities. | While some Freezones may not require a financial audit, others may follow rules set by the regulating body. |
| Capital Prerequisite | The cost of establishing a mainland company varies depending on the type of business and services offered, with a minimum cost typically around AED 20,000 to AED 25,000. | Freezone companies don't need approvals from UAE regulating bodies or ministries. Instead, they must obtain approval from the Freezone's regulating body, which can be an independent entity or a government body. |
| Approvals related to business setup | In order to be registered as a mainland company, the business requires approval from the Department of Development, Labour Ministry and the Department of Naturalization and Residency. Besides these, the company may require more approvals from related authorities if they wish to operate in health, education or food related sectors. | Free zone companies have it easier in terms of approval. If they are only exporting or re-exporting then they do not require any sort of outside approval. However, if they wish to partake in special services then they might require external approval. |
Benefits of Setting up a Mainland Company in UAE
- 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.
Start your Dubai Freezone(IFZA) Company @ AED 11,900! Send Us Your Inquiry
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 to Establish a Business in the Free Zone
There are several reasons why entrepreneurs choose to establish their businesses in a Free Zone:
#1. Ownership and Control
One of the key advantages of a Free Zone is that it allows for 100% foreign ownership of the business. This means that entrepreneurs have complete control over their company without the need for a local partner.
#2. Tax Benefits
Free Zones offer attractive tax incentives, including zero or minimal corporate taxes, import and export duties exemptions, and personal income tax exemptions. This can significantly reduce the financial burden on businesses and enhance profitability.
#3. Easy Company Setup
Setting up a business in dubai Free Zone is generally a streamlined and efficient process. The Free Zone authorities provide simplified registration procedures, minimal paperwork, and expedited licensing processes, enabling entrepreneurs to establish their companies quickly. Also check how you can get freezone license in dubai
#4. Infrastructure and Facilities:
Free Zones are equipped with world-class infrastructure, modern facilities, and state-of-the-art amenities. This includes office spaces, warehouses, logistics services, and access to advanced technology, providing businesses with a conducive environment to thrive.
#5. Business Support and Networking
Free Zones often provide comprehensive business support services, including legal assistance, administrative support, and access to networking events and industry-specific clusters. This fosters collaboration, innovation, and growth opportunities for businesses.
#6. Strategic Location
Free Zones are strategically located near major ports, airports, and transportation hubs, offering convenient access to global markets. This facilitates international trade and allows businesses to establish strong connections with partners and customers worldwide.
#7. Repatriation of Profits
Free Zones typically allow businesses to repatriate 100% of their capital and profits without any restrictions. This enables entrepreneurs to easily transfer their earnings back to their home country.
#8. Specialized Industries
Many Free Zones are industry-specific, focusing on sectors such as technology, finance, healthcare, media, and more. These specialized Free Zones offer sector-specific benefits, tailored regulations, and a supportive ecosystem for businesses operating in those industries.
What is the difference between mainland and Freezone companies in UAE?
The main difference between mainland and freezone is that a mainland company can conduct its business within and outside the UAE, while a free zone company cannot conduct its business outside its jurisdiction.
Does Free Zone sell on the mainland?
A free zone company can not conduct its business on the mainland. To do that, the free zone company will need to open a branch on the mainland by registering with the ministry of economy and the Department of Economic Development.
What is the difference between FZE and FZCO?
A Free Zone Establishment or FZE has a single shareholder, while a Free Zone Company has two or more shareholders. An FZCO is similar to a Limited Liability Company (LLC).
What is the meaning of a Free Zone in the UAE?
A free zone is an independent jurisdiction area in an emirate with its own government. One of the distinguished characteristics is that it permits 100% foreign ownership.
What is the mainland in the UAE?
Mainland in the UAE refers to the economic zone monitored by the Department of Economic Development. The DED is the governing body of the mainland. A mainland company conducts its business anywhere in and outside the UAE.
Author’s Opinion:
When it comes to setting up a new venture in UAE, there numerous aspects to consider. Business structure, registration, trade license Dubai fees, trade license renewal, and many more issues which are very difficult for a new company to keep track of on their own.
Not only that, but even making the choice between mainland and free zone is a big decision and in order to truly choose the right one for your company, it is best to team up with experts such as Company Setup Dubai who can help you make the best decisions for your company.
To Speak with our Experienced Business Consultants for further information and assistance, call us at +971582595164. Send a WhatsApp Message for Chat Query on +971 582595164 or email us at info@companysetup.ae.
