Choosing Your UAE Company: Mainland vs. Freezone

Overview:

Mainland vs. Freezone: Which is ideal for your business? UAE  offers a very attractive business landscape, one that enjoys full ownership rights, streamlined incorporation processes, and specialized industry zones for entrepreneurs. However, there is one very significant decision to make between a mainland or freezone type of company structure.
Businesses in the UAE can be established in three primary jurisdictions: Mainland, Free Zone, and Offshore. This analysis delves into the key distinctions between mainland and freezone setups to guide your decision-making. Both mainland and freezone structures within the United Arab Emirates offer unique advantages, disadvantages, and investment opportunities. The optimal choice hinges on your specific business activities and objectives. In this article, we will help you understand the difference between a mainland and a freezone company. Read ahead to find more:

What is a Mainland Company in the UAE?

A Mainland Company in the UAE is a company that is legally registered with the Ministry of Economy and operated by the DED. In order to establish a mainland company, you need to have a national sponsor from the UAE. Mainland companies are flexible companies because they can do business both within and outside the UAE. Ownership structures depend on the specific business type.

In trading businesses, ownership tends to favor the national UAE holders for 51%, while foreign investors own 49% ownership. A difference exists with service businesses where 100% foreign investor ownership is possible.

Advantages of Opening a Mainland Company in the UAE

Below are some of the reasons why you should can opt for a Mainland Company:

1. Tax-free setting:
   Mainland companies in Dubai are not levied with corporate tax.
2. Minimum capital is not required: 
   An initial investment of minimum capital is not required in opening a mainland company.
3. Varied business possibilities:
   Mainland companies allow one to conduct any business activity under the company more freely than that of Free Zone companies, which can only be restricted to their assigned zone.
4. Broader market access:
   Mainland companies can operate anywhere within the UAE, allowing them to reach a wider customer base and establish multiple branches.
5. Government contracts:
   Mainland companies are eligible to bid on and execute government contracts, unlike most Free Zone companies.
6. Currency flexibility:
   There are no restrictions on the currencies used in mainland business transactions.
7. Full repatriation of profits:
   Companies can repatriate their profits and capital freely.
8. Simplified registration:
   The registration process for mainland companies is generally straightforward.
9. No mandatory yearly audits:
   While audits may be recommended, they are not always mandatory.
10. No visa restrictions:
    Mainland companies can sponsor an unlimited number of visas.

What are Freezone companies?

Free Zones in the UAE are special economic zones that offer unique advantages to businesses. Each Emirate has its own Free Zones, governed by a Free Zone Authority (FZA) with its own set of regulations. These zones attract businesses by providing incentives like:

– Full foreign ownership: Unlike mainland companies, you can own a Free Zone company 100% without a local partner.
– Tax advantages: Free Zone companies usually enjoy tax-free imports and exports.

These characteristics make Free Zones the best for companies that want to:
Set up in Dubai: Many Free Zones are located in Dubai, a prime business hub.
Trade internationally: Free Zone companies can trade freely with other countries and Free Zones.

Types of Free Zone Businesses:

There are three types of businesses you can set up within a Free Zone:

Free Zone Company (FZC): A standard business entity for Free Zones.
Free Zone Establishment (FZE): Similar to an FZC, but with a simpler structure.
Branch of an existing business: You can establish a branch of your existing company within a Free Zone.

Mainland vs. Freezone:

The choice between a Free Zone and mainland setup depends on your business needs. Here’s a quick comparison:

Feature	Mainland Company	Free Zone Company
Local ownership	Required (51% minimum)	Not required
Trade flexibility	Trade within UAE and internationally	Trade internationally and with other Free Zones
Office space	Physical office required	Physical or virtual office allowed
Visa eligibility	More visas allowed with larger office space	Limited visas (typically 6-7)
Company audit	Mandatory	May or may not be required
Capital requirement	Minimum AED 20,000-25,000	Varies
Approvals	Multiple approvals needed	Approval from Free Zone Authority

Wrapping up

The decision between setting up a Mainland vs. Freezone company depends heavily on the personal business goals and priorities. Businesses that have their preferences for flexibility within the UAE market would choose to set up their company as a Mainland. Also, the advantage of 100% foreign ownership and tax exemptions are guaranteed to the Free Zone companies.
This is ideal for businesses requiring work throughout the UAE, government contracts, and a wider market.

A free zone company is suitable for an international trade business seeking a tax advantages-friendly environment where it can fully own a foreign company.
In the end, it is upon the individual entrepreneur and investor in the UAE to carefully consider aspects such as business activities, access to the market, ownership structure, and long-term strategic objectives to determine which business setup will best suit them.

Also Read: Advantages of Dubai World Trade Centre Free Zone

About Arnifi

Arnifi is a digital-first Corporate service provider helping companies enter the Middle East region, starting with the UAE and Saudi Arabia markets. Founded and backed by professionals from Amazon, Souq, and other large companies operating in KSA – the team understands what it takes to succeed as a startup in both UAE and Saudi Arabian markets, apart from going through the setup process multiple times. Arnifi will provide a truly digital experience for the entry and scale-up of companies in both the UAE and Saudi Arabia. Discover tailored solutions and strategic partnerships that propel your business forward. Check out at – www.Arnifi.com for more details.

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