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When it comes to Dubai company incorporation, entrepreneurs often feel perplexed when deciding where to establish their company, i.e., in the Free Zone or Mainland. While some businesses prefer free zone companies over mainland companies, others find mainland companies to be a more viable option. It all depends on the specific business requirements and activities they intend to conduct.
In this blog post, we will discover Dubai vs. Free Zone companies and their differences.
A Dubai Free Zone company is a business entity that is registered in a free zone in Dubai. Free zones are areas in Dubai that offer certain advantages to businesses incorporated there. The Free Zone Companies are only authorized to conduct business in Free Zone areas or outside the country. They cannot conduct business directly in the local market.
There are over 40 free zones in Dubai. A business can be set up as any of the following free zone company types in UAE:
Free Zone Company
Free Zone Establishment
Branch of a business concern
Free zone companies offer various advantages such as 100% foreign ownership, easy company incorporation process, tax exemption and access to global markets. However, these companies are generally forbidden from owning property outside their designated zones unless they establish a branch on the mainland for this purpose.
A Dubai Mainland company is a business entity that is registered with the Dubai Department of Economic Development (DED). The mainland companies can operate freely within the local market of Dubai as well as outside of the country.
Earlier, in order to register a business in Dubai mainland, an in-country Emirati national was required to be a sponsor. However, this requirement has now been done away with for certain commercial activities. Now, an entrepreneur can start a mainland company in Dubai with 100% foreign ownership.
The Dubai Department of Economic Development is in charge of mainland companies in Dubai. Its aim is to make commercial regulations and promote economic growth of Dubai.
We will understand the difference between Dubai Free Zone and Dubai Mainland companies with the help of the following table:
|
Parameter |
Dubai Free Zone Company |
Dubai Mainland Company |
|
Authority |
A specific free zone authority monitors free zone companies in a particular region. This authority manages and expands the assets of the free zones, and ensures that the regulations are followed. |
Mainland companies are monitored by the Department of Economic Development (DED), which is a government body. DED regulates businesses operating within the mainland area of a country. It typically excludes free zones.
|
|
Ownership |
Allow 100% foreign ownership |
Allows 100% foreign ownership for certain sectors, but 51% local sponsor ownership for others. |
|
Area of Business |
The Free Zone Businesses are only allowed to do business within the zone area or outside the country. They cannot do direct business within the local market in Dubai. |
The Mainland Companies have no restrictions and they are allowed to do business in the local markets in UAE as well as the international markets. |
|
Control on Business |
In Free zone companies, foreign investors have 100% ownership and control over the different activities. |
Earlier, Mainland companies only offered 49% foreign ownership. But now, foreign investors can have 100% ownership and control over most business activities in mainland Dubai companies. However, this comes with the exception of certain strategic sectors where a local partner might be required to have 51% ownership. |
|
Licensing |
The Department of Economic Development (DED) is responsible for licensing mainland companies. |
Each individual free zone has its own Free Zone Authority that manages the licensing process within that specific zone. |
Apart from key differences between mainland and free zone companies mentioned earlier, here are some other practical differences between them:
|
Parameter |
Dubai Free Zone Company |
Dubai Mainland Company |
|
Cost |
The cost of mainland business will depend on the size and nature of the business. Certain company structures mandate a minimum share capital which can significantly impact the initial Dubai company formation cost. |
Setting up a company in the Dubai mainland includes different costs. |
|
Corporate Tax Rates |
Exempted from corporate tax for a period of 50 years. |
@9% on the profits above AED 3,75,000 p.a. |
|
Types of Clients |
Free zone companies can easily deal with international clients but there are some restrictions to deal with mainland companies. |
Companies can easily deal with both international and domestic clients. |
|
Office Space |
Allowed to operate with a virtual office space. |
Must have a minimum office space of 200 square feet and cannot register on a virtual space. |
|
VISA restriction |
The number of VISA a Free zone company can apply will range from 1 to 6. |
Mainland companies can issue VISA depending on the office space, more space is equal to more VISA. |
Here are some important points to keep in mind regarding the mainland and free zone companies in Dubai:
If an owner of a Mainland company wants to convert the Mainland company into Freezone, then it is not allowed under any circumstances. Here the possible solution is to shut down the main company and start a free zone company. To get the benefits of both company registration in Dubai, some owners set up a company in both.
There is no customs duty on import of goods by companies in Free zones, but Mainland companies have to pay the customs duty on the import of goods.
In the UAE, there are 40+ Free zones. You must choose a Free zone as per the category and nature of the business you want to conduct. The license and Freezone company formation fees differ from one Free zone to another.
In this blog post, we described Dubai Mainland vs Dubai Free Zone companies. A Dubai Mainland company can do business locally and internationally while a Free Zone company has restrictions on local trade. Free Zone companies offer tax benefits and 100% foreign ownership, but Mainland companies provide more flexibility when it comes to business operations.
Freezone company formation or a Mainland business setup in Dubai require completion of several steps. We, at Registrationwala, help entrepreneurs to set up companies in the UAE without any hassle. Our experts will help you in registering your business, understanding free zone license costs and assisting in documentation. Reach out to us to know more about free zone company and mainland company formation in Dubai.
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