Setting up a business in the United Arab Emirates (UAE) can be an exciting venture, but it’s important to understand the differences between mainland and freezone business setups. Each option has its own advantages and considerations that can significantly impact your operations, legal obligations, and overall success. In this comprehensive guide, we’ll delve into the details of mainland and freezone UAE business setups, helping you make an informed decision that aligns with your entrepreneurial goals.
Difference Between Mainland and Freezone Dubai
To make this easy to understand, keep in mind there are two places in Dubai where an individual can start a business, mainland Dubai and the Freezone. The key difference between the two is that on the mainland, new companies will have to partner up with locals to start a business as per the established laws. In the free zone, an investor has 100% ownership of the business they wish to set up. To understand the differences more in detail, lets dive into understanding the main benefits and other advantages to setting up up a business within these economic zones
Points | Freezone | Mainland |
|---|---|---|
Local Sponsorship | 100% ownership is allowed without needing to have a local sponsor | 51% local ownership is required but they will not have control of your business. |
Visa | There is a limit which is usually about 6-7 visas that can be applied by Freezone company owners. | No restrictions on number of visas. However, office space needs to be expanded to procure additional visas. |
Office Space | Have the option of either getting a physical office space or applying for a virtual office. | Obligated to have a physical office space along with Ejari and necessary approvals from authorities. |
Flexibility | Flexibility to conduct international business freely with other Freezones and any country outside of UAE. | Freedom to conduct business within any city in UAE as well as any foreign country. |
Capital Requirements | There is no set capital requirements however approvals must be sought from the respective Freezone regulating body. | The minimum capital required by a mainland company is usually between AED 20,000 to AED 25,000. |
Approvals | Special services might require external approvals. However export trade does not require any such external approvals hence making it easier to conduct business in Freezones. | It is mandatory to seek approvals from Department of development, Labour ministry and Department of naturalisation and residency. Extra approvals will be required in F&B, education and health sector. |
Freezone Business Setup
Dubai Free zones are in demand as foreign business investors are allowed to have complete ownership of their businesses. Free zones help investors increase opportunities for trade as they are set up in areas that are easily accessible like seaports or airports. Under certain regulations, they are even allowed to manufacture semi-finished or finished goods for sale. In addition to this, businesses can avail of various tax benefits as easy access to resources. This makes setting up a business in the free zone one that is very much sought after.
Key Advantages:
- You can get 100% ownership of the business irrespective of your nationality or country of origin.
- Ability to get complete exemption of personal income tax in certain cases.
- Repatriation of profits are allowed in full.
- Due to the autonomy of Freezones to have their own jurisdictions, your business information remains confidential.
Mainland Business Setup
Considering what’s been said about Dubai Free zones, Dubai mainland could seem like a hard sell. However, it could not be further from the truth as Dubai mainland has its own set of alluring features that are very intriguing. With a local service agent you can trade without having to worry about legal permissions, trade internationally and faster business administration process which all lead to better scope and growth of your business.
Key Advantages:
When establishing a mainland business in the UAE, your company operates within the jurisdiction of the UAE government and its commercial laws. This setup allows you to conduct business activities across the entire UAE market, including both local and international trade. Here are some key benefits of a mainland business setup:
- Access to Local Markets: With a mainland setup, you have the freedom to conduct business throughout the UAE, targeting a wider customer base.
- No Limitations on Business Activities: Mainland companies have the flexibility to engage in a broad range of business activities, including retail, services, and manufacturing.
- More Flexibility in Choosing Office Locations: Mainland businesses can establish their offices in prime locations across the UAE, providing convenience and visibility to customers.
- No Minimum Capital Requirements: Unlike some freezones, mainland setups do not impose minimum capital requirements, making it easier to start your business.
- Access to Government Contracts: Mainland companies can bid for government contracts, opening up potential lucrative opportunities for growth.
Considerations and Restrictions
While mainland business setups offer numerous advantages, there are also some considerations and restrictions to bear in mind:
- Local Sponsorship: To set up a mainland business, you are required to have a local sponsor, who holds 51% of the company shares. This sponsor must be a UAE national or a company fully owned by UAE nationals.
- Licensing and Regulatory Requirements: Mainland companies need to adhere to specific licensing and regulatory procedures set by the UAE government, which may vary depending on the nature of your business activities.
- Higher Setup and Operational Costs: Compared to freezone setups, mainland business setups generally involve higher costs due to licensing fees, office rentals, and additional compliance requirements.
- Potential Market Competition: Operating in the mainland means competing directly with other local and international businesses, which can be challenging depending on your industry.
Learn more – Dubai mainland license cost
Low-Cost Business Setup In Dubai
This is one of the main reasons that many entrepreneurs and individuals with grand dreams flock to Dubai. With low tax rates and ease of acquiring documents and regulations to establish a business, Dubai is the perfect place to start your journey to make it to the Forbes list. The initial costs, although depending on the nature of your business, might vary from low to high. It is safe to assume that you can start your business at a relatively lower expense than in most cities.
Dubai Freezone Setup Cost
Considering many factors which include details such as the size of the company, number of employees, and type of activities that the business partakes in, your initial costs could start around 20,000 AED.
Dubai Mainland Setup Cost
The setup cost for a company in mainland Dubai will also depend on factors like the type of license, rent, investor fees and many more. Since it depends on a lot of factors it is hard to determine the exact cost of setting up a company in mainland Dubai but you can expect it to start at around 23,000 AED.
