Dubai Mainland and Free Zone: Which is Better for Company Formation?
One of the most popular destinations for business owners considering Middle Eastern growth is Dubai. The emirate has a number of benefits, including an economic strength, an advantageous location, and a welcoming business climate. There are two primary choices for business establishment in Dubai: mainland and free zone companies. The best sort of organization for your business must be chosen because each offers advantages and drawbacks.
What is a Mainland Company?
A group of businesses holding a license for running business on the Emirate of Dubai ground is known as a Mainland company in Dubai. An offshore business that has registered with the Dubai Department of Economic Development (DED) is another name for this kind of organization.
For entrepreneurs and business owners who want to benefit from the UAE’s advantageous location, strong economy, and investor-friendly laws, Dubai Mainland company incorporation is a popular choice. Businesses looking to tap into the regional market and conduct unrestricted operations within the United Arab Emirates can consider establishing a mainland firm in Dubai.
There are a few conditions that must be satisfied for a Dubai Mainland company setup firm creation in order to guarantee compliance to local laws. Businesses must, for instance, respect labor laws, immigration regulations, and other legal requirements as well as establish physical offices on Dubai’s Mainland.
The ability for enterprises to operate without limitations and to take advantage of a wide variety of commercial prospects is a key benefit of forming a company on the Dubai Mainland. Government contracts are also open to bids from mainland corporations, and these deals can be a sizable source of income for many organizations.
Before a company may be incorporated in Dubai, a number of conditions must be satisfied in regards to requirements. Among them are acquiring the required authorizations and licenses, signing up for VAT, and following to the rules governing accounting and auditing.
A business that is registered in a free zone in Dubai is referred to as a free zone firm. Free zones are special economic zones that provide numerous advantages to companies, including:
Comparatively speaking to other business creation processes, setting up a free zone firm in Dubai is rather simple. With minimum paperwork and bureaucracy, companies can be registered in as little as one day.
Entrepreneurs must choose a Free Zone location that suits their business objectives in order to establish a Free Zone firm in Dubai. In Dubai, there are various Free Zone locations, each with special benefits and features. Entrepreneurs must file the required paperwork for registration and acquire the required licenses and permits once they have decided on a location.
What is a Free Zone Company?
A business that is registered in a free zone in Dubai is referred to as a free zone firm. Free zones are special economic zones that provide numerous advantages to companies, including:
- 100% foreign ownership
- No corporate tax
- Fewer regulations
- Easier to set up and maintain
Comparatively speaking to other business creation processes, setting up a Free Zone company setup firm in Dubai is rather simple. With minimum paperwork and bureaucracy, companies can be registered in as little as one day.
Entrepreneurs must select a Free Zone area location that suits their business objectives in order to establish a Free Zone firm in Dubai. In Dubai, there are various Free Zone locations, each with special benefits and features. Entrepreneurs must file the required paperwork for registration and acquire the required licenses and permits once they have decided on a location.
For business owners seeking to benefit from the distinctive advantages of Free Zone areas, establishing a Free Zone company in Dubai can be a great choice. The establishment of a corporation in the Dubai Free Zone is a desirable alternative for companies seeking to grow their activities in the United Arab Emirates because to the expedited registration and licensing processes, 100% foreign ownership, and tax benefits.
Differences between Mainland and Free Zone Companies
In Dubai, there is a considerable difference between the Mainland and Free Zone jurisdictions since each one supports a different corporate structure. To choose which one best suits your company’s goals, it is crucial to comprehend the fundamental distinctions.
The following key differences will help you decide which choice best meets your company’s needs.
1. Possession
Previously, the UAE only allowed foreign investors to control up to 49% of a company, with the remaining 51% going to an Emirati sponsor. The law has recently been changed by the UAE government to permit 100% foreign ownership of some company ventures established on the Mainland. Free zones, on the other hand, do not limit foreign ownership, and investors can benefit from full ownership right away.
2. Business Focus
In Dubai, the main difference between mainland and free zone businesses is that free zone businesses aren’t allowed to operate outside of the specified free zone territory without the aid of a local agent. On the other hand, mainland businesses are not subject to the same limitations when operating anywhere in the UAE.
3. A work area
A Mainland company must secure a physical office space of at least 200 square feet in compliance with Dubai laws before the Department of Economic Development (DED) will issue a license to them. On the other hand, since some Free Zones allow virtual offices in place of physical ones, Free Zone businesses are not constrained by this need.
4. Visas
No visa limitations apply to mainland businesses, but the number of visas given varies according to the size of the workplace. If your business needs more visas, it must first buy or rent a bigger premises. However, the number of visas that free zone businesses may seek for is limited. The number of visas that are normally made available varies from 1 to 6 and is determined by the rules of the free zone.
5. Taxes
Businesses in Dubai’s free zones are completely exempt from taxes as long as they comply with all applicable regulations and don’t conduct any transactions with the country’s mainland. Only a 5% Value Added Tax (VAT) is applicable, and there are no personal or professional taxes levied in the Mainland. However, it should be noted that starting in June 2023, a required company tax of 9% would be levied.
6. Costs
In general, starting a business in a free zone is less expensive than doing so on the Mainland. This is due to the numerous tax savings and other advantages that free zones provide to enterprises.
7. Approvals Related to Business Setup
Setting up a Mainland firm in Dubai requires approval from a number of governmental organizations, including the Department of Economic Development, the Municipality of Dubai, and the Ministry of Labor. On the other hand, all newly founded firms in each Free Zone are subject to its laws and regulations. Additionally, establishing a business in a Free Zone does not necessitate requesting approval from governmental bodies or organizations located outside of the Free Zone.
Benefits of Mainland Company Formation
A firm can register on the Mainland and enjoy a number of benefits. Creating a Mainland firm ensures the success of your professional and business pursuits. These are a few reasons why businesspeople want to set up a Mainland company in the UAE.
- Greater access to the UAE market
- No restrictions on business activities
- 100% ownership control of mainland business entities
- Location flexibility
- Access to lucrative government contracts
- 100% exemption from corporate and personal taxes
- No constraints on the number of visas
With state-of-the-art infrastructure, tax and duty exemptions, favorable business opportunities, adaptable government policies, and facilities that facilitate the smooth operation of businesses, establishing a free zone business in Dubai offers a highly favorable environment for doing business. The advantages listed below are available to business owners who choose to establish their company in a free zone in Dubai, United Arab Emirates.
- Complete Foreign ownership
- Quick and simple company formation process
- Investors can repatriate 100% of their capital and profits
- Import and export duties are 100% exempted in free zones
- Companies in free zones can operate with fewer regulations and at lower costs
- Easier to set up and maintain
- Shareholders’ information is kept private in a free zone
- Free zones provide business advice and networking support to their investors
Which Type of Company is Right for You?
Dubai has developed into a hub of commercial activity, drawing businesspeople and investors from all over the world. Making the choice between forming a mainland or a free zone company is one of the first decisions anyone looking to launch a business in Dubai must make.
Selecting the best option for your company is crucial because each type of corporation has advantages and downsides.
Companies from the mainland must register with the Department of Economic Development and abide by Dubai’s rules and laws. This entails that they must pay corporation taxes, abide by labor rules, and get licenses and permits. They may, however, operate anywhere in Dubai and collaborate with neighborhood companies.
Free zone businesses, on the other hand, must register with particular free zone authorities and are subject to different regulations. They are exempt from paying corporation taxes, abiding by labor rules, and needing the same permits and licenses as businesses on the mainland. However, they are restricted to operating in their designated free zone and are not permitted to collaborate with other companies.
Your company’s demands will determine the best sort of business to choose. If you wish to operate in the neighborhood and collaborate with nearby companies, a mainland company is the ideal option. However, a free zone corporation is a smart choice if you want to benefit from the tax discounts and other advantages that come with free zones.
Deciding Between Mainland and Free Zone: Factors to Keep in Mind
It can be difficult to decide between a mainland firm and a free zone company when opening a business in Dubai. You must take into account a number of criteria in order to choose wisely.
1. Your Business Goals
If you wish to operate in the neighborhood and collaborate with nearby companies, a mainland company is the best option. A free zone corporation is more appropriate, nevertheless, if you wish to profit from the tax cuts and other advantages of free zones.
2. Your Budget
Free zone businesses may look alluring since they provide reduced prices and tax benefits. However, keep in mind that businesses operating in a free zone are only permitted to do so, and you could have to pay more for supplementary services or licences
3. Your Experience
If you are new to business and need more direction and help, a free zone company can be a better choice. Free zones offer networking assistance and business guidance, both of which can be helpful to new business owners. On the other hand, a mainland company is a superior choice if you have knowledge of the local market and would want more freedom in your business operations.
4. Business Location
The success of your business in Dubai depends on where you locate it. If you need to operate in the local market and need a physical presence, a mainland firm is your best bet. However, a free zone firm can be a better option if you are content to operate in a specific geographic area and value the advantages of a free zone.
Can I Change My Company from Dubai Mainland to Free Zone or Vice Versa?
It is not feasible to change a company’s status from Dubai Mainland to a free zone or the other way around. You must dissolve your mainland firm and establish a new free zone company if you wish to conduct business in a free zone. To take advantage of these advantages, some entrepreneurs choose to establish a company in both a free zone and on the mainland. It’s crucial to remember that you will still need to cancel your present license and get a new one for the new free zone if you wish to relocate your business.
Final Recommendations for Choosing the Right Company Formation in Dubai
We trust that this blog post has made clear the primary distinctions between UAE free zone and mainland businesses. It is crucial to comprehend the primary distinctions between these two jurisdictions if you are thinking about investing in the United Arab Emirates.
Which choice is suitable for you will depend on what kind of business you want to start and what kind of activities you want to engage in. The decision to launch a business in a free zone or on the mainland ultimately depends on your needs and objectives.
ExpressPRO can assist with business setup, whether you choose to launch your enterprise in a free zone or on the mainland. All government-related work will be handled by our skilled and knowledgeable personnel, guaranteeing a seamless setup.
Kindly contact our business advisers and consultants for additional information regarding business setup fees for mainland and free zone enterprises in the United Arab Emirates. We are available to address any of your questions.
