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mainland vs free zone

Mainland VS Free Zone company setup: Which option is right for you?

Many investors wonder what the difference between mainland and free zone companies is.  When we get into the Mainland VS Free Zone company considerations, there is a lot to keep in mind. It is not good that an investor does not have a clear understanding of the types of companies in the country.

In this article, you will learn everything about Mainland VS Free Zone company setup considerations. You must know how to differentiate both kinds of companies. Let us observe:

1.      Mainland company

2.      The Free Zone corporation

3.      What are the principal advantages of a Mainland company setup?

4.      What are the main advantages of a Free Zone company setup?

5.      How can Connect Group help you?

1. Mainland Company

When we talk about Mainland VS. Free Zone company setup, it is important to understand each one of its terms. Firstly, a Limited Liability Company (LLC) defines the company’s liabilities and is limited to its shares. This is one of the oldest and most well-known structures on the global market.

Hence, you can form a Limited Liability Company with as few as two shareholders and as many as fifty. According to UAE law, to incorporate this type of entity, a UAE national (corporate or individual) must own a minimum of 51 percent of the shares. So, the rest 49 percent is for the other shareholder in the company.

Thus, you will be able to access the UAE market benefits Mainland companies significantly.

1.1. Business overview

A mainland registered entity can conduct business throughout the UAE market. It may work with anyone inside or outside the UAE and is not limited to working only within its free zone.

1.2. The form of ownership

  • It is important to highlight that all Mainland licenses require a UAE national, either as a Local Partner or a National Service Agent.
  • An LLC. Out of a total of 100 percent shares, 51 percent must be held by a UAE national. The remaining 49 percent belongs to the expatriate partner.
  • An NSA. This is where business activities that fall under a professional license are assigned to the expatriate partner. In turn, a UAE national is designated as a national service agent. However, 100 percent of the shares are for the expatriate partner.

1.3. Workplace

You will need a minimum of 140 square feet of office space for each Mainland license. The license will be released only after an Ejari (Dubai) or Tawtheeq (Abu Dhabi) has been presented to the Department of Economic Development.

1.4.  Eligibility for Visas

There are no restrictions on a Mainland entity’s visa eligibility. The Ministry of Labor (MOL) issues an Electronic Quota to each company that shows their visa eligibility. You can increase it by increasing the size of your office space. One visa is allocated for every 80 square feet of office space.

Hence, if you have employees who are not in the office, such as sales, professionals, and drivers, you can apply for a separate quota for them. It is important to know that it will not affect your office space quota.

Additionally, Connect Group offers visa services. For example, we can help you to get a Dubai Work Remote Visa, an investor visa, or a Golden Visa.

1.5.  Approvals from the governing body

A mainland license does require standard license approvals. Department of Economic Development (DED), Dubai Municipality (DM), Ministry of Labor (MOL), Ministry of Interiors, or Immigration (MOI), are some examples.

You may need third-party governing approvals in some cases, depending on your business activities:

  • Knowledge and Human Development Authority (KHDA) for all education-related activities.
  • Dubai Health Authority (DHA)/Health Authority Abu Dhabi (HAAD) for all medical-related business activities. 
  • Municipal Food Control Department for all food-related licenses.
  • Civil Defense for all security-related activities.
  • Real Estate Regulation Authority (RERA) for all real estate-regulated business activities. Moreover, we offer real estate services.

1.6. Is a Mainland business setup right for you?

When we talk about Mainland VS Free Zone company setup, there are things to consider. Hence, you should have a good idea of the best business location for your company based on its operations and other requirements. Consider the following things:

1.6.1. Investors who want to win government contracts

Government projects in the UAE are safe, long-lasting, and offer opportunities for skill development. As a result, if you want to work in the government sector, a Mainland company setup in Dubai is the best option. Additionally, contact us for knowing more about government projects, such as The Projects of the 50.

1.6.2. Take advantage of Dubai’s profitable local market

Is your intended audience from the Mainland? Do you need to visit any other Emirates? What percentage of your customer base is made up of domestic customers? All of these questions will help you decide whether or not to consider the local market. Remember that a Mainland company setup in Dubai provides unrestricted access to the local market in Dubai.

1.6.3. A diverse range of business opportunities

Another compelling reason to establish a Mainland business in Dubai is the region’s list of permitted business activities. You can choose from the official list, and if additional approvals are required, you can obtain them as well.

2. The Free Zone corporation

A free zone is a defined and isolated land or setting with a distinct tax, customs, and imports regime from the rest of the country. The main benefit of owning a free zone company is that as an expatriate, you can own the company entirely. And the best part is that this can be possible without having to give away any of its shares.

2.1. Business overview

A Free Zone company can only do business within the free zone or outside of the UAE. It is not permitted to provide services or sell products in any UAE mainland jurisdiction. Hence, the restriction of local business through a distributor is mainly aimed at differentiation.

Namely, it has to differentiate between Mainland companies and free zone entities used for import/export in the local market. If they trade directly into the local market, a distributor with a Mainland license can help you. That is, he can act as your local agent and charge a fee that is lower than the 5% duty on free zone invoices.

Hence, if the company chooses to use a distributor, you must ship the goods through the distributor.  Otherwise, a 5% duty fee is levied on any goods leaving the Free Zone. Marketing a Free Zone company can also be difficult.

This is because you are only legally permitted to market your company within the free zone, whether face-to-face or by handing someone a business card.

2.2. The structure of ownership

In comparison to the Mainland, an expatriate owns the entire Free Zone license. There is no requirement for a UAE National partner or service agent.

2.3. Workplace

In contrast to the Mainland, you can obtain a Free Zone license with or without a physical office. The Free Zone Authorities permit license holders to use a smart/flexi office, but this limits your visa allocation usage.

2.4. Eligibility for visas

Free Zone companies are typically limited to a certain number of visas, which ranges from 1-to 6 visa packages. If you require more than the allotted allocation, you may need to rent physical space within the free zone. This can be expensive due to the limited supply but high demand for commercial space.

2.5. Approvals from the governing body

The primary purpose of establishing a free zone is to import and export goods and free zone authorities typically do not require approval from external authorities. On the other hand, they will not consider external approvals from governing bodies outside of your Free Zone.

2.6. Is a Free Zone business right for you?

Examine the elements of the Dubai Free Zone company setup listed below. Once completed, consider whether it is appropriate for your company based on its business model:

2.6.1. Low barrier to entry

Small businesses and startups do not have to worry about large upfront costs when they choose a free zone company setting in Dubai. In comparison to the Dubai mainland, the startup and overall business setup costs in free zones are slightly lower.

2.6.2. Sophisticated infrastructure

Pre-built offices, warehouses, and other facilities tailored to your company’s needs are available in free trading zones. Some of the benefits an FZ offers are:

  • Multi-tiered data centers 
  • A strong IT infrastructure
  • Easy access to all modes of transportation

In addition, if you want to set up a business in a Dubai Free Zone such as JAZFA, our agency can help you.

3. What are the principal advantages of a Mainland company setup?

A Dubai Mainland company setup provides attractive benefits. Hence, here are some advantages when you are searching for business setup considerations:

  • With a Mainland Company, you are completely exempt from corporate taxes. Furthermore, there is no requirement for a certain amount of capital. All you have to do is pay the statutory VAT of 5%, which is one of the lowest in the world. Additionally, Connect Group con assist you with the VAT.
  • You can enter the lucrative government sector by forming a mainland firm. Every year, the UAE government releases a variety of government consignments, which you can take advantage of through your mainland establishment.
  • Currency restrictions do not affect foreign enterprises on the mainland because they do not apply to them. Having a Mainland business in Dubai also simplifies the visa application process. Furthermore, you can easily apply for multiple visas to ensure your family’s safe stay in the UAE.
  • With a Mainland company, you gain access to Dubai’s world-famous local market. Furthermore, this enables you to launch the business of your dreams. Why? Because businesses in a variety of industries are expanding rapidly in the Mainland.

4. What are the main advantages of a Free Zone company setup?

Here are some benefits of a Free Zone company setup:

  • A Free Zone company registration in Dubai allows anyone, whether an Indian business aspirant or a local investor, to own 100 percent of their business. Furthermore, for FZ company formation, ex-pats require the services of a local service agent. They will help with paperwork and company registration but will have no legal responsibilities in the organization.
  • Because Free Zones have their own jurisdiction and caters to specific economic industries, your sensitive information is never made public. These distinct laws also provide additional corporate assistance in terms of resources, labor, and so on.
  • Profits from a Free Zone company formation in Dubai can be repatriated in full. You also get a complete exemption from personal income tax and capital gains taxation. Furthermore, import and export duties are taxed at a negligible rate.

5. How can Connect Group help you?

If you are interested in investing in the UAE, it is critical to understand the facts about the Mainland VS Free zone company setup. The investor or entrepreneur should consider these distinctions and choose the appropriate jurisdiction that best suits his/her business goals.

Hence, if you are having difficulty determining or comprehending the differences, we will be happy to help. Connect Group’s team of business consultants and advisors will assist you in your company formation process with our variety of services.

Would you like to contact Connect Group to obtain more information on Mainland VS Free Zone company setup considerations? If you have any questions, email us at contact@connectgroup.co, and you will talk to one of our representatives who will answer your questions.

Apply today by sending us your CV to thetalentpoint.com. Additionally, we will not store CVs and resumes that you send to contact@thetalentpoint.com. Open your business with our help.

The Complete Guide for LLC Company Formation in Dubai

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