The UAE isn’t just a commercial hub, it is an amalgamation of different business landscapes. Dubai gets a lot of attention, but each Emirate has its own commercial tale, from the bustling center of Abu Dhabi to Sharjah’s industrial heart.
However, the decision of whether to establish a business in the Mainland or Freezone is often a pivotal decision to which entrepreneurs struggle. The contrast often confuses new entrepreneurs and founders in the UAE, who are faced with a crossroad: freezones versus mainland setup. There is a lot things to consider which includes nature of the enterprise, its target clientele (local vs. international) and geographical scope of its operation. Each is a different offering with its own set of advantages focused on scale, location and essence of your business.
Differences between Mainland & Freezone
| Basis | Mainland | Free Zone |
| Registration Authority and Approvals | Approval from other authorities will be needed in addition to Dubai Economy and Tourism (DET), which was previously known as Dubai Economic Department (DED). | Also approval from other authorities may be required in some cases (there are more than 40 Free Zones in the UAE) and relevant Free Zone authority |
| Type of Legal Entity | Private/public joint stock, limited liability, limited partnership company; LLC; LLC-SO, branch of a foreign company. | FZE — single shareholder; FZCO — multiple shareholders; branch of a foreign company. |
| Audit Requirement | Accounts need to be audited. | Depends on the Free Zone. Where the intention is to take benefit of Corporate Tax by reason of being a Qualifying Free Zone Person, audit is mandatory. |
| Timeline for Setup | Physical presence of shareholders is not required, around a 1 month set up. | Not generally required, around 1-3 weeks depending on the Free Zone and physical presence. |
| Foreign Ownership Restrictions | The introduction of UAE Federal Law No. 19 of 2018 on Foreign Direct Investment gave 100% ownership permitted in some activities. | 100% foreign ownership possible. |
| Physical Office (Virtual Office/Flexi Desk) | Depends on the type of activity, but in some cases it is not needed | Most often it depends on the number of required visa quotas and the free zone itself |
| Conduct of Business | There are no restrictions on mainland companies to operate freely across the UAE. | Free Zone companies can only do business within the Free Zone or outside of the UAE unless they hire a local distributor. Only NOC from DET is allowed for carrying out business operations in mainland UAE. |
| Taxation | 5% VAT on Taxable Supplies (standard application), 9% Corporate Tax on Taxable Income from FY24 (calculated after adjusting the net profit, as per the Books of Accounts). | The 0% corporate tax rate available to Free Zone owners is available only to Qualifying Free Zone Persons (QFZPs) only if income is derived only by QFZPs from Qualifying Activities, as prescribed by the Ministry’s decision, and other conditions. If they do not become a Qualifying Free Zone Person, corporate tax at 9% will apply. |
Frequently Asked Questions
- What is a mainland company?
The company is a UAE Commercial Law mainland company. This enables the company to do business throughout the UAE including in its local markets and beyond the confines of designated free zones. - What is a free zone company?
The area where businesses establish a free zone company in Dubai includes a designated area that offers tax exemptions, 100% foreign ownership and other exclusive benefits. - What is the cost of starting a mainland company in Dubai?
The cost to set up a mainland company in Dubai ranges from AED 20,000 to AED 40,000 depending on the business activity and set up requirements. - What is the cost of starting a free zone company in UAE?
The cost of starting a free zone company in the UAE depends on the specific free zone and type of business, from AED 10,000 to AED 50,000 and even more. - How do I set up my company in Dubai?
Companies can be set up in two forms: mainland or free zone; among the available types of business activity; after deciding your business activity get the proper licenses; look for a proper business place and fulfill the UAE authorities’ documentation process.
Conclusion
With its forward thinking vision, the UAE is a world ripe with opportunities for ambitious businesses. The decision to be set up in Freezone or Mainland is determined by several factors, mirroring the heart of the venture. But one thing remains certain: the UAE is promising a prosperous business journey with the right guidance.
Thinking of dipping your toe into the UAE’s bustling business waters? Trusting GFLO Consultancy as your partner in this venture. Take a look at our Business Setup Services and start your path to success and promise.
