A Comparative Look at Mainland and Free Zone Companies in the UAE
Establishing a business in a foreign land brings with it a multitude of considerations and decisions to make. For entrepreneurs eyeing the United Arab Emirates (UAE) as their business hub, the choice between operating on the Mainland or within a Free Zone holds paramount significance. This article delves into the key differentiators between Mainland and Free Zone companies in the UAE, shedding light on ownership, business scope, workspace, visas, setup approvals, and company audits.
Ownership Dynamics: A Shift in Paradigm
Until recently, foreign investors looking to establish a presence on the UAE Mainland faced a significant ownership restriction. The ownership structure dictated that a maximum of 49% ownership could be held by the foreign investor, with the remaining 51% being allocated to an Emirati sponsor. However, the UAE government has taken strides in fostering a more welcoming business environment. For select business activities registered on the Mainland, foreign investors can now revel in the privilege of 100% ownership. Meanwhile, Free Zones eliminate this ownership restriction entirely, granting entrepreneurs complete ownership from the outset.
Business Scope: Embracing Geographical Flexibility
A distinct demarcation between Mainland and Free Zone companies exists in terms of business scope. A Free Zone company finds itself confined to conducting business solely within the Free Zone, unless facilitated by a local agent. Mainland companies, in contrast, enjoy the freedom to operate anywhere within the UAE without geographical limitations.
Workspace Essentials: From Physical to Virtual
The journey to securing a physical office space varies between Mainland and Free Zone companies. A Mainland company is mandated to possess a minimum of 200 square feet for its physical office. This space requirement precedes the issuance of the company’s licence by the Department of Economic Development (DED – Mainland). Conversely, Free Zone companies enjoy more flexibility in this regard. Many Free Zones allow businesses to establish virtual workplaces, eliminating the mandatory need for a physical location.
Visa Dynamics: Balancing Numbers and Regulations
The realm of visas showcases another notable distinction between the two setups. Mainland companies encounter no stringent visa restrictions, but the number of visas granted is contingent upon the workspace area. Should a Mainland company require additional visas, the expansion of workspace becomes a prerequisite. In contrast, Free Zone companies grapple with varying visa limitations. The quantity of visas attainable is regulated by the individual policies of the respective Free Zones and typically ranges from 1 to 6.
Setup Approvals: The Nexus of Bureaucracy and Autonomy
Launching a business on the UAE Mainland mandates approvals from a constellation of governmental agencies. These encompass the Department of Economic Development, the Municipality of Dubai, the Ministry of Labor, among others. The tapestry of regulations differs when venturing into Free Zones, where each zone operates under its own legal framework. A distinct advantage is that entrepreneurs within a Free Zone ecosystem are unburdened by the necessity of obtaining permissions from external government bodies.
Audit Obligations: Unveiling Fiscal Accountability
The curtain falls on our exploration with a spotlight on company audits. A uniform requirement for Mainland companies is the completion of a financial audit at the close of each fiscal year. Notably, Free Zone companies are not universally bound by this mandate. Year-end audits become obligatory solely for specific categories of Free Zone companies such as Free Zone Establishments (FZE) and Free Zone Company Operations (FZCO).
Advantages of a Mainland company
- Freedom to conduct business throughout the UAE without restrictions
• 100% exemption from corporate and personal taxes
• Allowed 100% repatriation of profits and capital
• Potential bid and work on UAE government contracts
• No constraints on the number of visas
• Can set up their office location anywhere in the registered emirate and establish multiple company branches creating a solid presence in the local market
• Unrestricted access to the global markets
Advantages of a Free Zone company
- 100% ownership without the need of UAE sponsor
• Quick and easy company formation
• 100% repatriation of capital and profits
• 100% exemption from import and export duties
• Shareholders’ details remain private to the public
• Relatively easy recruitment policy
• Free Zones provide business advice and networking support
In summation, the decision to establish a business on the UAE Mainland or within a Free Zone hinges on a myriad of factors. The nuances of ownership, business scope, workspace, visas, setup approvals, and company audits steer the course of this significant choice. Each avenue offers distinct advantages, catering to the diverse needs and ambitions of entrepreneurs looking to make their mark in this dynamic business landscape.
Being located in Convention Tower, Italiacamp Dubai Hub for Made in Italy is able to support startups, SMEs and large corporations seeking to establish their entities in one of the region’s most advantageous settings, the Dubai World Trade Centre Free Zone. At the same time, depending on the specific requirements of your business activities, we may be able to support you in obtaining a dual licence (DWTC Free Zone and Mainland).