UAE Free-zone or Mainland Company with residence visa, employment card and bank account opening.
UAE Free-zone or Mainland Company with residence visa, employment card and bank account opening.
UAE Free-zone or Mainland Company with residence visa, employment card and bank account opening.
UAE Free-zone or Mainland Company with residence visa, employment card and bank account opening.
UAE Free-zone or Mainland Company with residence visa, employment card and bank account opening.
Manage your business and track services |
WIO Bank Official Partner Seamlessly open your UAE Bank Account |
Manage your business and track services |
WIO Bank Official Partner Seamlessly open your UAE Bank Account |
Manage your business and track services |
WIO Bank Official Partner Seamlessly open your UAE Bank Account |
Manage your business and track services |
WIO Bank Official Partner Seamlessly open your UAE Bank Account |
Manage your business and track services |
WIO Bank Official Partner Seamlessly open your UAE Bank Account |
The UAE is a top spot in the Middle East for starting a business. It is known for its welcoming environment for various industries and nationalities. It offers a stable, business-friendly setting, attracting investors worldwide. Entrepreneurs can incorporate their business within a free zone or on the mainland. This decision often prompts questions like, 'What is the difference between mainland and freezone companies?' and 'Which option best aligns with my business needs?'
Each choice presents its own set of advantages, limitations, and opportunities tailored to your venture's specific requirements. This article aims to guide you through these considerations, help demystify the process, and inform you of your decision on where to establish your business in the UAE.
Looking to establish your business in the UAE, whether in the mainland or a free zone? At Filings.ae, we're ready to assist with every aspect of your business setup journey in the UAE.
A mainland company in the UAE is a business entity registered under the Economic Department of the particular emirate it operates. Unlike freezone companies, mainland entities can conduct business anywhere within the UAE and beyond without geographical restrictions.
Here are the benefits of establishing a mainland company:
A freezone company in the UAE is a business set up within one of the country's special economic zones. Each free zone caters to specific industry sectors and offers a business-friendly environment with its own set of rules and regulations, separate from those governing mainland businesses. It is ideal for companies targeting regional and global markets from a UAE base.
Establishing a company in a free zone comes with several advantages:
Key differences between Mainland and Free Zone companies in the UAE are outlined in the following sections, highlighting the distinct features and regulations that set these two business entities apart:
Ownership is a fundamental aspect that differentiates mainland companies from free zone entities in the UAE:
Mainland Company
Before 2021, international investors less favoured mainland companies due to ownership restrictions. Traditionally, the UAE law required a local Emirati sponsor to hold at least 51% of the business, limiting foreign ownership to 49%.
The recent amendment to the UAE's company law has significantly shifted this landscape, allowing foreign investors to own 100% of mainland companies in many sectors. However, this full ownership privilege is sector-specific and determined by the government, maintaining the traditional ownership structure for certain business activities.
Free Zone Companies
Freezone companies in the UAE are not bound by these ownership constraints. From the outset, foreign investors are entitled to 100% business ownership without needing a local sponsor.
This autonomy in ownership is a key attractor for foreign investment in freezones, as it allows international business owners full control over their operations without mandatory local partnership.
The core distinction in operational scope between mainland and freezone companies in the UAE lies in their geographic and market access:
Read our article on Dubai Company Registration Cost
The workspace prerequisites for companies in the UAE vary significantly between mainland and free zone entities:
Also read: Freezone Visas in the UAE
The taxation landscape for companies in the UAE differs between mainland and free zone jurisdictions:
Below is a table summarizing the key differences between mainland and free zone companies in the UAE:
Feature | Mainland Company | Free Zone Company |
Ownership | Previously, a UAE national was required as the majority shareholder, but now, it allows 100% foreign ownership in many sectors. | 100% foreign ownership is allowed without a local sponsor. |
Business Scope | Can operate anywhere in the UAE and take on government contracts. | Restricted to operating within the free zone and international markets; requires a local agent for mainland operations. |
Office Space | Must have a physical office space depending on the type of business license | Flexibility with office space; can have physical or virtual office |
Visas | There is no limit on the number of visas, dependent on office space. | The limit on the number of visas varies by free zone authority. |
Regulatory Body | Department of Economic Development (DED) of the respective emirate. | Specific Free Zone Authority (FZA). |
Taxation | Subject to 9% corporate tax on profits over AED 375,000; no personal income tax. | Exempt from corporate and personal income taxes. |
Customs and Import/Export | Subject to customs duties. | Exempt from customs duties within the free zone. |
VAT | Standard 5% VAT applies. | Generally, there is 5% VAT; some zones offer 0% VAT benefits under specific conditions. |
Legal Structure and Activities | More flexible, can engage in a wide range of activities. | Restricted to activities permitted within the free zone. |
Market Access | Direct access to the UAE market. | Mainly international market focus; limited local market access without a distributor. |
Government Contracts | Eligible to bid. | Not directly eligible unless through a mainland branch. |
External Approvals | It may require additional government approvals. | Typically, it only requires free zone authority approval. |
Expansion and Branches | Easier to expand across the UAE. | Expansion outside the free zone requires additional setup or partnership. |
Deciding to start a business in the UAE's mainland or a free zone depends on your needs. Mainland companies are great for those wanting to do business all over the UAE, offering wide market access. Free zone companies are perfect for those focusing on international trade, offering benefits like 100% foreign ownership and no taxes. Recent changes now allow more foreign ownership in mainland businesses too. Your choice should match your business plan, whether you're aiming for a local presence or global reach from the UAE.
Are you planning to start a business in the UAE in the mainland or a free zone? We at Filings.ae are here to guide you through every step of your business setup in the UAE.
We are backed by reputed investors like ICICI Bank Limited, BeeNext & Udtara.
We have over 700 employees across UAE & India to support our global client-base.
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We are committed to providing affordable and reliable services to our clients. At Filings.AE, our team of 700 employees across India serve over 1 lakh paid customers globally. We help businesses with incorporation, trademark, tax filing, compliance and payroll services.