Mainland vs Free Zone - Which is Best for Your Business
Table of Contents
In the United Arab Emirates, entrepreneurs often struggle to choose which jurisdiction to operate under. You may be stuck in the frenzy of mainland vs free zone, too. Well don’t pull your hair out yet because we got your back. This article’ll discuss the differences between mainland and free zone businesses, two popular choices for UAE entrepreneurs. Let’s dive in and find out which option suits your business needs best!
Mainland company
A mainland company is an onshore entity registered with the government body of the relevant emirate. The trade license is issued by the Emirate’s Department of Economic Development (DED).
One of the biggest advantages of mainland business setup is that you can retain 100% foreign ownership of most types of mainland companies, covering a wide range of activities. However, remember that some businesses might still require an Emirati partner. Before we dive into making the choice, let’s learn a bit more about mainland business requirements.
Ready to conquer the Dubai mainland and set your business up for success? Here’s your ultimate guide to navigating the process with ease!
Identify Your Business Activity
First things first—figure out what your business will be all about. Your business activity is crucial because it dictates the legal form and type of license you’ll need. Whether you’re going commercial, industrial, or professional, there are six types of licenses you can choose from: industrial, commercial, professional, tourism, agricultural, and occupational. With over 2,000 business activities available in the UAE, the world is yours to take!
Choose Your Legal Form
Next up is selecting your business’s legal form. This is key to understanding which laws and regulations will apply to you. In the UAE, you have a variety of options, including:
General partnership
Limited partnership
Limited liability company (LLC)
Public joint stock company (PJSC)
Private joint stock company (PrJSC)
Civil company
Local company branch
GCC company branch
Foreign company branch
Free zone company branch
Sole establishment
Holding companies
Each legal form has its own vibe, so pick the one that fits your business style!
Register Your Trade Name
Time to get creative! Choosing a trade name for your Dubai mainland business requires following certain guidelines and procedures. The trade name must reflect your business activities and receive official approval before being used.
Get Initial Approval
Initial approval means that the UAE Government has no objections to your business being established. This allows you to move forward with the setup process, although it doesn’t permit you to start your business activities just yet. Foreign
In the United Arab Emirates, entrepreneurs often struggle to choose which jurisdiction to operate under. You may be stuck in the frenzy of mainland vs free zone, too. Well don’t pull your hair out yet because we got your back. This article’ll discuss the differences between mainland and free zone businesses, two popular choices for UAE entrepreneurs. Let’s dive in and find out which option suits your business needs best!
Mainland company
A mainland company is an onshore entity registered with the government body of the relevant emirate. The trade license is issued by the Emirate’s Department of Economic Development (DED).
One of the biggest advantages of mainland business setup is that you can retain 100% foreign ownership of most types of mainland companies, covering a wide range of activities. However, remember that some businesses might still require an Emirati partner. Before we dive into making the choice, let’s learn a bit more about mainland business requirements.
Ready to conquer the Dubai mainland and set your business up for success? Here’s your ultimate guide to navigating the process with ease!
Identify Your Business Activity
First things first—figure out what your business will be all about. Your business activity is crucial because it dictates the legal form and type of license you’ll need. Whether you’re going commercial, industrial, or professional, there are six types of licenses you can choose from: industrial, commercial, professional, tourism, agricultural, and occupational. With over 2,000 business activities available in the UAE, the world is yours to take!
Choose Your Legal Form
Next up is selecting your business’s legal form. This is key to understanding which laws and regulations will apply to you. In the UAE, you have a variety of options, including:
General partnership
Limited partnership
Limited liability company (LLC)
Public joint stock company (PJSC)
Private joint stock company (PrJSC)
Civil company
Local company branch
GCC company branch
Foreign company branch
Free zone company branch
Sole establishment
Holding companies
Each legal form has its own vibe, so pick the one that fits your business style!
Register Your Trade Name
Time to get creative! Choosing a trade name for your Dubai mainland business requires following certain guidelines and procedures. The trade name must reflect your business activities and receive official approval before being used.
Get Initial Approval
Initial approval means that the UAE Government has no objections to your business being established. This allows you to move forward with the setup process, although it doesn’t permit you to start your business activities just yet. Foreign investors must secure approval from the General Directorate of Residency and Foreigners’ Affairs before obtaining initial approval.
Memorandum of Association (MOA) and Local Service Agent (LSA)
Depending on your business’s legal form, you’ll need a Memorandum of Association (MOA) or a Local Service Agent (LSA) agreement. This paperwork is essential for:
Limited partnership
Limited liability company (LLC)
Public joint stock company (PJSC)
Private joint stock company (PrJSC)
Pick the Perfect Spot
Location, location, location! Every business in the UAE needs a physical address. Your spot must meet the requirements set by the emirate’s Department of Economic Development and local municipalities. Don’t forget to have your office or warehouse rental agreement ready. In Dubai, you’ll need to register it with Ejari.
Score Additional Approvals
Some business activities need extra thumbs-up from specific government entities. Here are a few examples:
Ministry of Interior: For things like driving schools and car rentals.
Ministry of Justice: For legal activities and consultancy.
Local Municipal Department: For architecture and engineering.
TDRA: For telecommunication activities.
Executive Council: For travel, tourism, and more.
Ministry of Economy: For insurance activities.
Local Health Departments: For health-related ventures.
Supreme Petroleum Council: For oil and gas operations.
Collect Your Business Licence
You’re almost there! After jumping through all the hoops, it’s time to collect your business license. Head to the economic department’s service centers or you can get it online.
Gather Your Documents
To snag that business license, here’s what you’ll need:
Initial approval receipt and previous documents
Copy of your lease contract (make sure it’s attested by RERA in Dubai)
Attested memorandum of association (for all company types)
Approvals from other relevant government bodies
Attested service agent contract (for certain companies)
Make sure to pay for your trade license within 30 days of receiving your payment voucher, or else your application might go poof!
Free zone company
This Mainland vs Free Zone battle cannot end unless you know everything about Free Zone company setup. The concept of free zones in the UAE took off in the 1980s, and they have expanded significantly since then. Today, there are over 45 free zones across the country, each offering unique advantages. Dubai’s free zones are special economic areas that provide regional benefits and incentives tailored to attract businesses.
These zones are monitored by independent governmental or non-governmental free zone authorities, ensuring smooth operations and regulatory compliance. With a focus on specific industries, free zones in Dubai offer a streamlined setup process and various benefits, making them an attractive option for entrepreneurs and investors.
Setting up your business in one of the UAE’s bustling free zones is a fantastic way to tap into a world of opportunities. Ready to dive in? Let’s break down the steps to get your business up and running!
Determine the Type of Legal Entity
First, decide what type of business entity you want to create. In a free zone, you can choose between:
Free Zone Limited Liability Company (FZ LLC) or Free Zone Company (FZ Co.)
Free Zone Establishment (FZE)
The key difference is in the number of shareholders and whether the shareholder is a person or a company. Not all free zones offer both options, so make sure to check with the free zone authorities to see what’s available.
Capital Requirement
Different free zones have different rules for capital requirements. Here’s a quick look:
twofour54 Abu Dhabi: No minimum capital needed. Start as you are!
KIZAD: Kick things off with AED 150,000 for an LLC.
Dubai Airport Free Zone: Get going with AED 1,000 for an FZ Co., each share valued at AED 1,000.
DMCC: Start with AED 50,000 per company and AED 10,000 per shareholder. For a General Trading Licence, you’ll need AED 1 million.
Hamriyah Free Zone: An FZE requires AED 150,000 in share capital.
Choose a Trade Name
Your trade name is your brand’s identity, so make it memorable! Check with the free zone authority or the Department of Economic Development to ensure your chosen name is available and fits the guidelines.
Apply for a Business Licence
Your business license will depend on what you plan to do. Make sure your license matches your primary activity and get ready to rock and roll!
Choose an Office Space
You can buy or lease office space in free zones, with options to suit your needs. Here’s what’s available:
DMCC: Choose from a flexi desk (20-30 sq. m.), a flexi office (200-265 sq. m.), or offices that span multiple floors up to 2,000 sq. m. each.
Hamriyah Free Zone Authority: Offers over 100 executive office suites ranging from 15 m² to 42 m², complete with all the bells and whistles, including conferencing and internet facilities.
Get Pre-Approvals, Register Your Business, and Get Your Licence
Each free zone has its own rules, but don’t worry—we’ll guide you through the process! Here’s a general idea of what you need:
A. Initial Approval
Start with initial approval. Here’s what you’ll need to submit:
Completed application form
Business plan
Copy of your existing trade license/registration certificate (if applicable)
Colored passport copies of shareholders and the appointed Manager/Director
Specimen signatures of shareholders and the appointed Manager/Director
2 years’ audited financial reports for corporate entities or a bank reference for individual shareholders
NOC from your current sponsor (for individuals)
Unit title deed
Letter of Intent
Registry Identification Code Form (RIC) for Manager/Director (original and notarised)
Freelancers: You can breathe easier! You only need:
Application for registration
CV
Bank reference letter
Registry Identification Code Form (RIC) (original and notarised)
B. Registration
Once you get the initial thumbs-up, it’s time to pay registration and license fees. Then submit some more documents as required by the legal entities.
C. Licensing and Visa Process
The free zone authority will prepare your lease agreements. Then your trade license will be issued, and you’re officially in business!
Some activities might need extra approvals from other authorities, so check if anything special applies to your business adventure.
Mainland vs Free Zone Comparison
Choosing between mainland and free zone can be tough. So here’s a comparison table outlining the pros and cons of mainland and free zone business setups in the UAE:
Aspect
Mainland Business
Free Zone Business
Ownership
Up to 100% foreign ownership in most sectors
100% foreign ownership allowed
Market Access
Unrestricted access to the UAE local market
Limited to operating within the free zone and outside UAE
Import Duties
No exemptions
Exemptions on imports and re-exports
Currency Restrictions
No restrictions
No restrictions
Infrastructure
Varied, based on location
Modern and contemporary infrastructure
Location
Wide choice across the UAE
Strategically located free zones
Tax Benefits
Subject to corporate tax in certain sectors
Zero corporate and income tax
Repatriation
Repatriation may have some limitations
Full repatriation of capital and profits
Government Contracts
Eligibility for government tenders
Not eligible for government contracts
Regulations
Complies with UAE laws and regulations
Governed by specific free zone regulations
Business Flexibility
Greater flexibility for business activities and expansion
Limited to activities approved by free zone authority
Confidentiality
Standard confidentiality protocols
High level of business confidentiality
Now that you have a clearer understanding of the Mainland vs Free Zone business setups, you’re well-equipped to make an informed decision about where to establish your business in the UAE.
Start Your Business with Bestax
Heres a short summary of the mainland vs free zone battle. A mainland business setup gives you unrestricted market access and the flexibility to operate anywhere in the UAE, making it perfect for those looking to tap into the local market. On the other hand, a free zone business benefits include 100% foreign ownership, tax benefits, and modern infrastructure, making it ideal for businesses focused on international trade and operations.
Whichever path you choose, Bestax is here to guide you every step of the way. Our team of experts is ready to offer personalized advice and company formation services tailored to your business needs. We understand the intricacies of both mainland and free zone setups and can help you navigate the legal requirements, ensuring a smooth and hassle-free business launch.
Don’t wait any longer to start your entrepreneurial journey in the UAE. Contact Bestax today and let us help you turn your business vision into reality!
FAQs: Mainland vs Free Zone Business Setups
1. What are the main differences between mainland and free zone business setups?
Ownership: Mainland businesses offer up to 100% foreign ownership in many sectors, while free zone companies always allow 100% ownership.
Market Access: Mainland businesses enjoy unrestricted UAE market access, whereas free zone businesses are limited to their zone and international markets.
Business Activities: Mainland companies can participate in a wider range of activities, including government contracts, while free zone businesses are restricted to approved activities.
Taxation: Mainland businesses are subject to UAE corporate tax; free zone businesses benefit from tax exemptions.
2. Which is better for my business: mainland or free zone?
Mainland Business Setup: Ideal for targeting the UAE local market and engaging in diverse business activities.
Free Zone Business Benefits: Best for international trade, full foreign ownership, and tax advantages.
3. What are the benefits of a mainland business setup?
Mainland Business Advantages: Access to the local market, flexibility, multiple branches, and eligibility for government contracts.
4. What are the benefits of a free zone business setup?
Free zone company setup offers 100% foreign ownership, tax exemptions, modern infrastructure, and full profit repatriation.
5. How do I choose between the mainland and free zone?
When comparing the mainland to the free zone, consider the target market, ownership preferences, business activities, and costs.
6. What are the cost differences between mainland and free zone setups?
Mainland: Costs include trade licenses, office space, and sponsorship fees.
Free Zone: Competitive packages for office space, licenses, and visas vary by zone.
7. Can I switch from free zone to mainland?
Yes, switching from free zone to mainland is possible but requires canceling the free zone license and setting up a mainland entity.
8. What are the regulatory requirements for mainland businesses?
Trade license from DED, legal structure compliance, registration with authorities, and adherence to labor laws.
9. What are the regulatory requirements for free zone businesses?
Register with the zone authority, obtain a business license, comply with zone rules, and follow visa regulations.
Disclaimer: The information provided in this blog is for general informational purposes only. For professional assistance and advice, please contact experts.
