What are the differences between Mainland and Free zone companies in UAE?
One of the most asked question by entrepreneurs who want to set up a business in Dubai mainland or Dubai free zone is this: What’s the difference between the two?In this blog, we have come up with some of the most basic differences so that you have enough knowledge to decide what’s best for your business.
Differences between both on various aspects
1. How do you define Dubai Mainland and Dubai Free zone companies?
Mainland Companies: A mainland company in Dubai is also known as an onshore company. Its license is provided by the Department of Economic Development (DED) of Dubai and allows the companies to do business in the local market as well as outside the United Arab Emirates without any restrictions.
Free Zone Companies: Companies set up in the free zones of any of the emirates of UAE are called Free Zone Companies. They are exempted from taxes and have other amenities.
2. What are the differences in the ownership structure?
Mainland Companies: A foreign investor can only have 49% of ownership. A local sponsor i.e. a UAE national, with 51% of ownership is mandatory for setting up a company in Dubai Mainland. It also the type of license you are acquiring. If you have a commercial license, then you hold 49% of the shares. If you have a professional license, you will have 100% shares with one UAE National appointed as a Local Service Agent.
Free Zone Companies: If you set up a company in Dubai free zone, you have 100% ownership of your company. You can control your company’s business activities. There is no requirement of a local investor.
3. What are the differences in the operational structure?
Mainland Companies: If your business is in Dubai Mainland then you are allowed to do business anywhere in UAE including all the free zones as well as internationally. From commercial, professional to industrial activities. The only exception is banking and insurance.
Free Zone Companies: Whereas if your company is established as a free zone company then you are allowed to trade only in Dubai Free zones or internationally. You do not have access to local markets. If you want to, you will have to seek help from a local agent.
4. What are the differences in the working space?
Mainland Companies: The minimum requirement for mainland companies is 200 square feet annually. If you want to lease out more than that then you will have to issue a license from DED i.e. Department of Economic Development.
Free Zone Companies: Free zone companies do not have to worry about working space because they do not necessarily have physical offices. They have facilities like ‘Flexi desks’ which allow them to use common business center desks for a minimum of 5 hours per week. This service is also called ‘plug in and go’.
5.How does the visa facility differ?
Mainland Companies: One of the best advantages that UAE gives to a mainland company to businessmen is that they offer unlimited visas. The ministry of Labor also issues an E-quota for mainland companies showing its visa eligibility. You can get more workspace if your employee count is more. Visas like outdoor sales staff/PRO ad driver/messenger visas are not included in this.
Free Zone Companies: Free zone licenses offer two types of visas in the smart office package. Some also allow 3-6 visas in the package. It depends on the emirate you are considering. If you are in need of more visa then you will have to lease out a physical office space or a warehouse.
6. What are the government authorities for each jurisdiction?
Mainland Companies: Mainland companies require standard government approvals like from DED (Department of Economic Development), DM (Dubai Municipality), Ministry of Labor (MOL), Department for Naturalization and Residency affairs of Ministry of interiors or Immigration (MOI). Also, you will need approvals for some activities from external authorities like KHDA (Knowledge and Human Development Authority) for all Education related license, DHA (Dubai Health Authority) for all medical-related licenses, FOOD Department of Municipality for all food-related license, Civil defense, Real Estate Regulation Authority, etc.
Free Zone Companies: Free Zone companies mostly are for companies that are for imports and export business and hence do not need approvals from external authorities until and unless there are some special activities.
New business owners and investors must seek advice from trusted business consultants so that they choose the right type of jurisdiction for their business. EBMS is one of the most experienced Business consultancy agency in Dubai. To know more about our services and our Dubai mainland pricing, contact us today.