UAE is currently experiencing an economic boom, and this comes with a lot of new business opportunities. This means that every day new startup companies are being established, and entrepreneurs are trying their hardest to succeed in the business world.
When you decide to set up a company in the United Arab Emirates (UAE), you should know that there are three different concepts: mainland, free-zone and offshore.
The UAE is known as a business hub, and one of the main reasons for this is the availability of many types of business opportunities for people with varying interests.
The decision between mainland and free zone setup is entirely dependent on the type of activities and style of business you wish to pursue. If you prefer complete ownership and control over your firm, a free zone is the perfect solution.
In this article, we will guide you and tell you the difference between the mainland and the free zone in UAE.
A mainland company is simply an onshore corporation that is registered with the governing authority of the UAE. The trade license is provided by the Emirate's Department of Economic Development. A UAE mainland corporation is distinguished primarily by its unrestricted trading opportunities.
Dubai mainland company formation in Dubai needs a local sponsor or a UAE national. UAE national Sponsor holds 51% share in the company and the Foreign Shareholder (s) holds 49% share. The mainland company offers a flexible legal contract between foreign investors and local sponsors, where the local sponsor is paid an annual fee or percentage of sales/profits.
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The benefits of setting up a mainland company in the UAE are:
Free Zones (also known as free trade zones) are created to improve international business by providing expatriates with 100% ownership and a single-window administration convenience. The UAE has been a business hub and over the years the economic development of the country has been closely associated with the entrepreneurial spirit of the UAE community.
UAE Free Zones offers a customized advisory service that gives clear direction and guidance to savvy investors who want to set up their operations in the Emirates, whether onshore or offshore.
Free zones also provide the perfect environment for business establishment, with advanced infrastructure, duty and tax exemptions, world-class business amenities, flexible government regulations, and unrivaled services.
The following are the advantages of establishing your business in Dubai free zone:
The list of UAE free zones includes Dubai South, International Free Zone Authority, Dubai Multi Commodities Center, Jebel Ali Free Zone, Dubai Airport Free Zone, Abu Dhabi Airport Free Zone, Abu Dhabi Global Market, Dubai World Trade Centre, Dubai Silicon Oasis, Dubai Commercity Free Zone, Dubai Virtual Commercial City, Dubai Internet City, Dubai Academic City, Sharjah Media City, Sharjah Research, Technology, and Innovation Park, Ras Al Khaimah Economic Zone, Umm Al Quwain Free Trade Zone, KIZAD, Twofour54, Intl Media Production Zone, Hamriyah Free Zone, Ajman Free Zone.
Whether you want to set up a mainland company or a free zone company you should be aware of the differences between the two concepts.
| Mainland company | Free zone company | |
|---|---|---|
| Ownership | - it is obligatory that a minimum of 51% of the total company shares has to be assigned to a UAE local sponsor and the remaining 49% is owned by the foreign investor. | - complete ownership of the business. The presence of United Arab Emirates National in the license is not mandatory. |
| Scope of business | - the corporation is permitted to conduct business both within and outside of the UAE. | - certain restrictions apply to companies incorporated in any of the UAE free zones. Free zone companies are authorized to conduct business both inside the jurisdiction of the free zone and outside of the UAE. |
| Office space | - a minimum office space requirement of 140 sq. ft is obligatory for a UAE mainland company. | - virtual offices are allowed. Companies do not need to have physical offices. |
| Visa Eligibility | - there are no visa eligibility limitations for mainland enterprises in the UAE. The number of visas issued is determined by the size of the workplace. This indicates that if the company's owner needs additional visas, he or she should have more working space. | - on small businesses, there are allowed between 2 and 6 visas packages depending on the UAE free zone. If you need extra visas, you can obtain a number of them by leasing a real office or a warehouse. |
| Approval from government authorities | The mainland companies need to seek approvals from various government bodies like the Department of Economic Development, Dubai Municipality, Ministry of Labour etc. | - most free zone businesses are primarily involved in imports and re-exports. These companies are not obligated to get approval from an external entity before issuing a license. Only if they choose to obtain any particular services would they need the approval of external authorities. |
| Capital prerequisite | The minimum capital prerequisite of a UAE mainland company is determined by its legal structure. | The minimum capital prerequisite of a free zone company is determined by the Emirate in which the company is formed. |
| Company Audit | - it is mandatory a Financial Audit | - depending on the free zone jurisdiction, is established the audit preparation. FZE (Free Zone Enterprise) and FZCO (Free Zone Company) need to prepare a year-end audit. |
An industry leader in business consultancy and company formation in the UAE for over a decade, UAE Free zones (an established online platform for Global Resources) has been designed for entrepreneurs that have a business idea but don’t have the knowledge, resources or the experience to move their concept forward and kickstart their business in the UAE.
UAE Free Zones provide the necessary help to start your business, offering company formation and a competent business environment is essential in increasing your own company. Help your company grow. We will guide you step by step.