When it comes to opening a company in Dubai, most of the entrepreneurs get confused that where to establish a company in a Free zone or a Mainland. Some businesses found Free zone company formation better than the Mainland and others found mainland companies better than Free zone companies.
So, to remove the confusion, below we mentioned the differences between Dubai Mainland vs. Free Zone. It doesn’t matter where the company is located, entrepreneurs can open a bank account anywhere is Dubai.
What Are Dubai Free zone Companies?
The Dubai Free zone company is a separate legal entity, that works completely on its own rules and regulations. Companies are allowed to do business only in the Free zone areas or outside the country.
The ownership rules have been changed by the authority about foreign investment. Now foreign investors can have 100% ownership of the business, with no need to have an Emirati sponsor. In Dubai, there are 40+ Free zones, a business can set up three types of companies in Free zone:
- Free Zone Company
- Free Zone Establishment
- Branch of a business concern
Free zone companies also have the benefits of tax exemption, easy company registration in Dubai, and access to regional and global markets.
What Are Dubai Mainland Companies?
As per the United Arab Emirates, mainland companies can operate in the local market as well as outside of the country. To register a business in the mainland of Dubai, an in-country Emirati national must be a sponsor.
The mainland business setup Dubai is still working on the old principal ownership structure, 51% of the business will be held by an Emirati sponsor and 49% by Foreign Shareholders. These companies provide a bespoke legal arrangement to international and national investors. The local sponsors get some percentage of the sales annually.
The mainland companies of Dubai are in charge of the Dubai Department of Economic Development (DED). Its aim is to make commercial regulations and protect the rights of consumers.
Difference Between Dubai Mainland vs. Free Zone
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Dubai Free Zone Company
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Dubai Mainland Company
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Authority
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It is a special free zone, that provides benefits in a particular region. This zone is authorized by an independent non-government authority and entity.
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Mainland companies are monitored by the Department of Economic Development (DED) which is a government body.
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Ownership
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Allow 100% foreign ownership
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You have complete control over your business, but you need a local sponsor
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Area of Business
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Businesses are only allowed to do business within the zone or outside the country
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Companies have no restrictions and they are allowed to do business in any part of the UAE, across the globe.
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Control on Business
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On Free zone companies, foreign investors have 100% ownership and control over the different activities.
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Mainland companies are controlled by legal authorities to protect you and your company.
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Licensing
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To get a Dubai Free zone license, there is a single video, although to set up a company multiple documents are required. For obtaining these certificates there is a single independent authority.
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Multiple documents and permissions are required from different administrative authorities, Department of Economic Development.
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Other Practical Differences Between Mainland and Free zone Companies
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Dubai Free Zone Company
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Dubai Mainland Company
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Cost
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The cost will depend on the size and nature of the business. These companies have their own costs, although some companies require a minimum share capital that increases the cost of company formation.
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Setting up a company in Dubai mainland includes different costs. The minimum price to set up a company is AED 26 thousand. Similarly, the cost depends on the business type, the number of shareholders, and the office rent.
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Corporate Tax Rates
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Exempted from corporate tax for a period of 50 years.
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@9% on the profits above AED 3,75,000 p.a.
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Types of Clients
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Free zone companies can easily deal with international clients but there are some restrictions to deal with mainland companies.
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Companies can easily deal with both international and domestic clients.
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Office Space
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Allowed to have the office space in virtual space and it saves costs.
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Must have a minimum office space of 200 square feet and cannot register on a virtual space.
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VISA restriction
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The number of VISA a Free zone company can apply will range from 1 to 6.
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Companies can issue VISA depending on the office space, more space is equal to more VISA.
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Important Points Regarding Mainland and Free zone Companies
- If an owner of a Mainland company wants to convert the Mainland company into Freezone, then 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 if goods are imported by companies in Free zones, but Mainland companies have to pay the customs duty on the import of goods.
- In UAE, there are 40+ Free zones, so it is recommendable to choose a Free zone as per the category and nature of the business. License and Freezone company formation fees differ from Free zone to Freezone.
Conclusion
To do a Freezone company formation or a Mainland business setup in Dubai, both required several steps to complete. We at Registrationwala, help entrepreneurs to set up the company smoothly in the country. Our experts will help you in:
- registering your business
- understanding free zone license cost
- complete documentation
Reach out to us to know more about free zone company and mainland company formation in Dubai.
