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