Company Registration in UAE: Mainland vs Freezone
Entrepreneurs and investors often find it challenging to differentiate between Freezone and Mainland Dubai businesses. In Dubai, location is a crucial factor as the city has diverse areas that offer access to various resources and networks.
Freezone and Mainland Dubai are distinct parts of the city that operate under separate sets of rules and regulations. Each area boasts a strategic location that provides a unique environment for business growth and development.
By comparing the advantages and disadvantages of Freezone versus Mainland Dubai businesses, one can make an informed decision about the best location for their enterprise in Dubai.
What is a Mainland company in Dubai?
A mainland company is a type of business that is registered onshore and obtains its licenses from the Department of Economic Development (DED) or a corresponding municipality in a different emirate.
In order to obtain licensing, mainland companies are required to secure a physical workspace of at least 200 sq ft and provide evidence of a lease or Ejari certificate. Additionally, these companies must obtain further approvals from government entities to engage in commercial activities.
Depending on the nature of the business, approval may be needed from entities such as the Ministry of Labor, the Ministry of Interior, and trade-specific associations like the Health Authority.
What is a Freezone company in Dubai?
Freezone companies are businesses that are established within designated economic zones and are governed by a managing authority. Many of these zones are geared towards specific industries such as healthcare, media, and technology.
Freezone companies are prohibited from engaging in government contracts and can only conduct business operations within their designated zone. To trade with the local UAE market, it is necessary for these companies to utilize the services of a local agent.
Key differences between a Mainland and freezone company in UAE
| Module | Mainland Companies | Freezone Companies |
| Ownership of Business | Foreign investors can now fully own their businesses thanks to a recent government policy change. Previously, ex-pat business owners were limited to a maximum ownership of 49%, with the remaining 51% being held by an Emirati sponsor. | Complete ownership of the company is granted to the foreign investor, rendering the need for a UAE local sponsor to hold shares unnecessary. As a result, the role of a local sponsor is insignificant in this scenario. |
| Scope of business | A business incorporated in the UAE mainland is free to do business anywhere in the UAE market. The company is allowed to do business both inside and outside the UAE. | Incorporating a company within a UAE-freezone comes with certain limitations. Such companies are permitted to conduct business activities within the jurisdiction of their respective free zone as well as outside the UAE. |
| Office space | Unlike mainland companies in the UAE, free zone companies are not required to have physical office space. It is possible to establish a free zone company with or without a physical location. Virtual offices are permitted in UAE free zones. | A physical office space requirement is not obligatory for a Free zone company. Free zone company formation is possible with or without premises. In the case of the UAE free zone, virtual offices are allowed. |
| Visa Eligibility | There are no visa eligibility restrictions for UAE mainland companies. The number of visas issued is determined by the size of the workspace, meaning that larger work premises will result in more visas being available for the company owner. | Free zone companies have specific limitations regarding visa eligibility. Generally, the number of visas that can be obtained ranges from 1 to 6, and the visa packages offered in each free zone jurisdiction may differ. To obtain more visas, additional work premises must be leased. |
| Company Audit | A Financial Audit is mandatory for a UAE mainland company. | The requirements for conducting a financial audit of a freezone company differ depending on the jurisdiction in which it is located. Some free zones are not required to undergo an audit, while others, such as FZE and FZCO, must conduct a year-end audit. |
| Capital prerequisite | The minimum capital requirement for a UAE mainland company is determined based on its legal structure. | The minimum capital requirement for a freezone company is determined by the Emirate in which the company is established. |
| Approvals related to business setup | Mainland companies are required to obtain approvals from various government bodies, including the Department of Economic Development, Dubai Municipality, and the Ministry of Labour. | Every freezone has a distinct set of rules and regulations that apply to all companies established within its jurisdiction. Unlike mainland companies, free zone companies do not require external approvals from government bodies and agencies outside the free zone to set up their business. |
What are the benefits of starting a mainland company in Dubai?
Establishing a mainland company in Dubai offers several advantages. Mainland companies have the freedom to engage in direct trading with the local market and are not restricted to a specific location within the UAE mainland. Additionally, these companies have the opportunity to pursue government contracts that can be quite profitable.
Previously, non-GCC investors were not allowed to hold 100% ownership of mainland companies as a standard requirement. An Emirati sponsor was required to hold a 51% stake with a foreign investor owning only 49%.
However, recent changes in the law have allowed for 100% ownership of mainland businesses in industries other than oil and gas, telecoms, and transport. Mainland companies can also apply for an unlimited number of employee visas, although eligibility is usually based on the size of the business premises.
What are the benefits of starting a Freezone company in Dubai?
Starting a business in the UAE through a freezone setup is often the most cost-effective option. This is primarily due to the low licensing costs and the absence of a requirement to lease physical premises.
One of the key benefits of establishing a freezone company is the 100% customs tax exemption, zero currency restrictions, and the ability to repatriate all capital and profits. freezone companies have the advantage of being owned entirely by non-GCC investors in all circumstances, without the need for additional steps or approvals.
Freezone License in UAE allows investors to trade in multiple commodities, render business services, and start manufacturing units in UAE. Following are the major Freezone License types in UAE.
- Service
- Commercial Trading
- General trading
- Industrial / Manufacturing
What is the cost to set up a Freezone company in Dubai?
The cost to set up and run your business in one of Dubai’s freezones varies significantly. Below is a breakdown of the four main fees incurred with Dubai business set-up and operations:
- Company Registration Fee
- Licence Fee
- Office Fee
- Share Capital
For a more comprehensive overview of how different the company set-up costs are between Dubai’s different freezones, click here.
Our Recommendations:
International Freezone Authority, Dubai (IFZA)
IFZA, Co-branded with Dubai Silicon Oasis has become the fastest-growing business hub and one of the most affordable options for obtaining freezone license in Dubai. The main feature is that companies incorporated in IFZA are Limited Liability Companies with the ‘FZCO’ suffix. IFZA is governed by the rules and regulations of the Dubai Silicon Oasis Authority.
Ras Al Khaimah Economic Zone (RAKEZ)
RAKEZ is formed by the merger of the RAK Free Trade Zone (RAKFTZ) & RAK Investment Authority freezone (RAKIA). Also, RAKEZ is known as the most innovative freezone in the world. Proposing you the cheapest and international level economic zone with flexible packages and services as well as state-of-the-art facilities.
How can GenZone help?
We are experts with in-depth knowledge to guide investors on all matters starting from finding the right location to set up business in UAE, registration with a Freezone, legal structure of the company, getting a trading license from freezone, banking assistance, obtaining a new director visa, employment visas and family visa etc.
