The Difference Between Mainland and Free Zone Companies in the UAE
Foreign investors and business owners from all over the world have different aims and goals related to Company Formation in UAE. UAE is known as the hub of business opportunities, and that is why it is among the top preferences of business owners. The country offers different business formation options, and among these are the mainland and free zone company formation. Hence, investors often get confused when it comes to selecting the appropriate company type to start their business setup in UAE.
Mainland and Free zone, both companies have their merits and demerits. They have vast investment opportunities and are designed for different types of investors. But, selecting a mainland or free zone company completely depends on the nature of your business activity or the kind of your business. If you want to conduct your business in the UAE only, you must prefer mainland company formation. But, if you want to have complete ownership and control of all your business-related procedures, you must opt for free zone company formation.
Let us discuss the advantages of both the companies and have a detailed look at their differences in this article.
Advantages of Mainland Company Formation in Dubai:
Some benefits of mainland company formation are:
• It is exempted from corporate tax.
• 0% minimum capital requirement for setting up a mainland company in the UAE.
• Mainland companies have various business options for business activities as compared to the free zone company formation.
• The process of registration for mainland company formation is simple.
• There is no currency restriction involved in the mainland company formation.
• No restriction on the number of visas on the mainland license.
• There is the freedom to do business in any part of the UAE.
Advantages of Freezone Company Formation in Dubai:
Some benefits of freezone company formation are:
• Transfer of funds is completely free in free zone company formation.
• It is completely exempted from duties on exports and imports.
• The free zone company is famous for privacy protection as it doesn’t declare the details of company information to the general public under any circumstances.
• Full repatriation of profits and capital.
• Warehousing facilities and 25 years leasing plan.
• 100% ownership is offered to foreign investors and business owners in free zone company formation.
Differences Between Mainland and Free Zone Companies in The UAE:
Below are some points that will help you understand the differences between Mainland and free zone companies in the UAE.
Scope of Business:
Companies that are formed in the UAE mainland have no limit related to the scope of business. This type of business can operate anywhere in Dubai or outside Dubai. They can opt for any sort of industrial, commercial, or professional activities but can’t engage in banking and insurance activities.
As compared to the mainland, a free zone company is restricted to a certain designated area given to the company. If they want to do business in the local market, investors will need a local service agent or partner for this purpose. The most preferred free zone businesses are related to imports and exports.
There is no restriction on the number of visas for a mainland license. It depends on the amount of your office space. You can have the number of visas equal to the amount of your office space for your business. If the company needs more staff, the number of visas can also be increased in this case.
But, in the case of free zone company formation, each free zone license is permitted to have 2 visas on the package, while some free zones in the UAE permit 3 to 6 visas on this package.
If you are planning for a mainland company setup in UAE, you will need a local service agent that can be a UAE National. This local partner will assist you in initiating your business, and it is a compulsion for mainland company formation. In the case of a commercial license, the local service agent owns 51% shares in the business, and the remaining 49% shares are of the investor.
While in the case of a freezone company formation in UAE, you have 100% ownership of the business, and there is no need of sharing it with a UAE National. You have complete control over all the operations of your business. This is the best benefit of a free zone company setup in UAE.
The license for a mainland company formation will be issued to you by the Department of Economic Development only if you have leased out are of 200 sqft for your mainland company setup.
While in the case of free zone company formation, there is no compulsion to have a physical office for your business. Considering the nature and structure of your business activity, you may not have a physical office space.
Government Authorities Approval:
For getting your license for a mainland company registration in UAE, you need to get approval from government authorities. You can start your business in the UAE mainland only if your license is approved and issued by the Department of Economic Development.
But, in the case of setting up a free zone company, you don’t need to get your license issued after the approval of any external authority. Mostly free zone businesses are related to imports and exports, and for that, you don’t need government authority’s approval.
Frequently Asked Questions:
Following are some significant questions people usually ask regarding mainland and free zone companies in the UAE.
• Can a Free Zone Company Conduct Business in The Mainland of TheUAE?
Free zone businesses do not permit the companies that are under free zone authorities to do business in the mainland of Dubai. There is a complete restriction on free zone jurisdictions to conduct business in the mainland of the UAE.
• What is The System of Financial Auditing in Both Companies?
In mainland companies, financial auditing is mandatory. But, in the case of free zone businesses, not all companies are required to undertake financial auditing.
• What is The Cost of The Mainland and Free Zone Company Formation in TheUAE?
100% estimation of the cost for the formation of both companies is not possible. But, in the case of the mainland, the cost depends upon the size of your business and the nature of your business activity. On the other hand, in the formation of a free zone company, the cost depends upon the number of visas, and it changes from free zone to free zone.
In the end, we can say that both the mainland and free zone companies have their own advantages and disadvantages. It is up to you which company you choose to set up in the UAE. It all depends upon the nature of your business activity, your preferences, and your requirements. The better a company suits you, the better your business will grow.