Mainland vs Freezone: Which Is Best for Your Business?
Starting a business in Dubai offers numerous opportunities due to its strategic location, business-friendly environment, and diverse market. However, one of the most critical decisions you’ll need to make is choosing between establishing a mainland company or a freezone company. Each option has its unique advantages, regulatory requirements, and cost structures. Understanding these differences is essential to making an informed decision that aligns with your business goals. In this blog post, Mainland vs Freezone Company Setup in UAE, explore their respective benefits, and provide a detailed cost comparison to help you determine which setup is best for your business.
Read Post: How to Setup Business in UAE?
Understanding Mainland and Freezone Companies
Mainland Company
A mainland company in Dubai is registered with the Department of Economic Development (DED) of the respective emirate. These companies are onshore entities and can conduct business both within the UAE and internationally. One key feature is that mainland companies can trade freely without restrictions on location or business activities within the UAE.
Freezone Company
Freezone companies are established in specific areas within the UAE called freezones, which are governed by their own regulatory bodies. These zones offer special incentives, such as 100% foreign ownership, tax exemptions, and simplified business setup processes. However, freezone companies are restricted from conducting business activities directly in the UAE mainland without a local agent.
Key Differences: Mainland vs Freezone Company Setup in UAE
Ownership Structure
- Mainland Company: Traditionally required a UAE national to hold 51% of shares in certain sectors, but recent reforms allow 100% foreign ownership in many activities.
- Freezone Company: Allows 100% foreign ownership without the need for a local sponsor or partner.
Business Scope
- Mainland Company: Can operate anywhere in the UAE, including the mainland and freezones, with no geographic restrictions.
- Freezone Company: Can operate within the freezone and internationally but needs a local distributor or agent to conduct business in the mainland UAE.
Office Space Requirements
- Mainland Company: Must have a physical office space, with a minimum area requirement typically starting at 200 sq ft.
- Freezone Company: Can choose between physical office space and flexible options like virtual offices, depending on the freezone regulations.
Visa Eligibility
- Mainland Company: No limit on the number of visas, but the number depends on the size of the office space.
- Freezone Company: Visa quotas vary by freezone, usually allowing between 1 to 6 visas.
Regulatory Approvals
- Mainland Company: Requires multiple approvals from various government bodies such as the DED, Ministry of Labor, and Municipality.
- Freezone Company: Requires approvals only from the freezone authority, simplifying the setup process.
Cost Comparison: Mainland vs Freezone Company Setup
License Cost for Mainland Company
The cost of setting up a mainland company in Dubai varies based on the type of business activity, the office location, and the number of employees. The cost of the license starting from AED 10,405*.
On average, the setup cost ranges from AED 20,000 to AED 30,000. This includes:
- Trade name reservation
- Initial approval from DED
- Office space rental
- Licensing fees
- Visa costs
- Additional approvals for specific business activities
License Cost for Freezone Company
The cost of setting up a freezone company depends on the specific freezone chosen, the type of business, and the facilities required. The cost of the license starting from AED 5,500*.
Calculate your business setup cost.
Setup costs generally range from AED 15,000 to AED 50,000. This includes:
- Registration fees
- License fees
- Office or flexi-desk rental
- Visa packages
- Shared or dedicated office facilities
Advantages of Mainland and Freezone Companies
Advantages of Mainland Companies
- Unlimited business activities: Conduct business anywhere in the UAE without geographic restrictions.
- No visa limits: Obtain as many visas as needed, provided the office space can accommodate them.
- Government contracts: Eligible to bid on UAE government contracts and projects.
Advantages of Freezone Companies
- Full ownership: 100% foreign ownership without the need for a UAE sponsor.
- Tax benefits: Enjoy corporate tax exemptions and import/export duty exemptions.
- Simplified setup: Faster and more straightforward business setup processes with fewer regulatory hurdles.
Key Differences Between Mainland and Free Zone
Here’s a table summarizing the key differences between mainland and free zone companies in Dubai:
| Aspect | Mainland Company | Free Zone Company |
|---|---|---|
| Ownership | Requires 51% local ownership (can be waived for some activities) | 100% foreign ownership |
| Business Scope | Can trade anywhere in the UAE and internationally | Can trade within the free zone and internationally, but not directly in the UAE market without a local agent |
| Physical Office | Must have a physical office space registered with Ejari | Can have a physical or virtual office, depending on the free zone’s regulations |
| Visas | No limit on the number of visas, but additional space may be needed | Typically limited to a specific number of visas (6-7) depending on the free zone |
| Company Audit | Annual financial audit is mandatory | Some free zones may not require an audit, depending on their regulations |
| Regulatory Approvals | Requires approvals from various UAE authorities | Only needs approval from the free zone’s regulatory body |
| Cost | Typically ranges from AED 20,000 to AED 25,000, depending on the business type | Varies by free zone; may include setup costs and minimum share capital requirements |
| Tax Exemption | 100% exemption from corporate and personal taxes | 100% exemption from import and export duties, corporate, and personal taxes |
| Trading Restrictions | No trading restrictions within the UAE | Restricted to trading within the free zone and internationally |
| Government Contracts | Eligible to bid for UAE government contracts | Not eligible for UAE government contracts |
This table provides a clear comparison to help you decide which business setup aligns best with your needs and objectives.
Conclusion: Choosing the Right Business Setup
Deciding between a mainland and freezone company in Dubai depends on your business needs, budget, and long-term goals. Mainland companies offer greater flexibility for conducting business within the UAE, while freezone companies provide attractive incentives for foreign investors, including full ownership and tax benefits.
How Infibiz Can Help You
At Infibiz, we specialize in guiding entrepreneurs and investors through the business setup process in Dubai. Whether you choose a mainland or freezone company, our experienced team will handle all aspects of the setup, from regulatory approvals to office space solutions. We ensure a smooth and hassle-free experience, allowing you to focus on growing your business.
Book Free Consultation with Infibiz’s Experts.
Contact Infibiz today for a free consultation and take the first step towards establishing your successful business in Dubai.
