The location of your business is way more than its address. Do we really need to mention that location can make or break a business! Not only, your company site plays a significant role in enticing and retaining the best employees, but also can significantly boost a company’s long-term performance. Keep in mind that poor location decisions can cost a fortune in lost talent, productivity and capital. So, before you jump the gun, consult one of the best business advisors in Dubaiwho can help you find the most suitable location for your business setup in the UAE.
Why choose Dubai mainland for company formation?
Dubai has mainly three types of company formation – Mainland – LLC formations; Free zones – FZE, FZC formations and Offshore companies with no physical existence. The mainland is essentially the area outside of a free zone area in the UAE. Entities operating from the mainland are known as onshore businesses, with their licences issued by the Department of Economic Development (DED) or any related department in other Emirates. When it comes to choosing between a mainland and free zone location in Dubai for business formation, one has to be vigilant about the pros and cons of the site that seems right at first sight. Without a doubt, mainland businesses get to enjoy so many benefits. The Department of Economic Development (DED) provides a number of advantages to entrepreneurs, investors, and companies looking to start a business in Dubai, Mainland. The only downside of mainland business formation was the condition of sharing 51% of ownership with the UAE national, which has been removed last year in June 2021. Now that mainland jurisdiction allows 100% foreign business ownership for 2000+ commercial activities in the UAE, most business persons opt for a mainland company setup. In addition to complete business right without the need of involving Emirati sponsor or local/national service agent (LSA/NSA), mainland business setup brings myriad other benefits as well, such as:
- Mainland business setup allows you to create a flexible start-up
- With a mainland company, merchants can plan and initiate any form of trade without bothering about the legal associations of exceeding trade permission in Dubai and the complete UAE jurisdiction
- A mainland/onshore company, unlike a free zone establishment in the UAE, is allowed to do business in the local market as well as outside the UAE without any restrictions
- There is no capital requirement to acquire a mainland company licence in Dubai except for certain cases as per UAE law
- The mainland company registration process is hassle-free because of fewer regulations and restrictions
- Onshore companies enjoy fewer limitations and a broad range of opportunities compared to players in free zones
- Mainland players have freedom to earn potentially worthy government contracts, unlike free zone companies that are allowed to work only with private commercial companies
- Businesses in mainland unlike in free zones can be established anywhere in the UAE, which leads them to expand their scope and maintain a strong presence
Why choose Dubai mainland over free zone?
Click here to know why should you choose Dubai mainland over the free zone or look at the below-given table of comparison between the two or check out both. Your call!
|Parameters||Dubai Mainland Company||Dubai Free Zone Company|
|Company ownership||Many activities are allowed to have 100% ownership on the mainland, but not all.||100% foreign ownership for 100% of business activities.|
|Business Scope||Mainland businesses enjoy the freedom to trade with other mainland businesses, free zones, and also businesses outside the UAE.||Free zone businesses indulged in trading physical goods can only trade with other free zone corporations as well as internationally, or they can work with a third-party distributor to work with the mainland.|
|Tax Exemptions||Mainland entities currently have NIL corporate tax, but are subject to 9% tax from the year 2023 upon surpassing a certain threshold for most activities. Thanks to the recent amendments in UAE laws.||All free zone entities are fully exempt from paying any kind of tax. (VAT is still mandatory for certain thresholds on taxable supplies and imports).|
|Company Setup Cost||Given the recent changes in the local sponsorship regulations in the UAE, the costs of setting up a company in the UAE mainland are comparatively cheaper than that in a free zone. Your mainland business cost also increases if your office space is expensive or you need additional approvals/NOCs from third-party authorities.||Free zone business setup costs vary from free zone to free zone. You would need to consider factors such as business activities, flexibility, regulatory frameworks, or tax exemptions rather than solely relying on the licence setup costs to decide between free zones or the mainland.|
|Office Premises||All Dubai mainland businesses must be registered within a physical address. Minimum office space after one year of ownership only, size depends on the number of visas required.||Free zones provide a company set-up with or without office space, depending on the business activity and the number of employees. The physical address could be for an office, co-working space, or a Flexi desk. However, all free zone businesses must secure their physical offices within the free zone.|
Professional activities (like consultants) usually do not require physical office space.
|Visa Eligibility||No limits on the number of visas for mainland companies, however, they have to possess sufficient office space to be eligible for the same.||1-6 visas are permissible. Some free zones offer up to 120 visas with office space|
|Company Formation Procedure||The physical presence of the owner (or the person holding Power of Attorney) in the country is necessary in case of a mainland company setup. The Power of Attorney must be notarized and attested by the UAE embassy in the home country of the company owner, and then again by the Ministry of Foreign Affairs in the UAE.||The free zone business formation procedure can be completed entirely remotely without the need for the owner to be physically present in the chosen emirate of the UAE.|
|Business Setup Time||For a mainland business licence, the timeframe is usually about 5-10 business days. Instant licences are much quicker to obtain.||It usually takes about 3-5 working days for a free zone trade licence to be issued.|
|Financial Audits||All UAE mainland businesses are required to present an annual financial audit.||Most free zone companies in Dubai, UAE do not have to present a financial audit. Some free zones however mandate this, case in point: DMCC.|
|Trade Licence Activities||On the mainland, it is unusual to receive trade licences for both commercial and professional activities unless there is an explicit correlation. For example, trading in equipment that also requires servicing.||Almost every free zone in Dubai, UAE operates based on the standard ISIC list of activities from DED, some will add or exclude activities on their own volition or to support specific areas. Business owners are often allowed to combine professional and commercial activities in many free zones.|
|Trade Licence Types||All business licence types available||All types are available in general free zones. However, there are limitations for specific free zones.|
|Minimum Share Capital||Not required. The minimum capital prerequisite of a UAE mainland company is decided by its legal structure.||The minimum capital prerequisite of a free zone establishment is decided by the Emirate in which the company is formed. Most free zones do not require paid-up share capital. Some, such as DMCC, have a minimum requirement of 50,000 AED. Other than that, the minimum for most who do not require paid-up share capital is 10,000 AED.|
|Government Approvals||The main approval for registering mainland businesses in Dubai is from the DED. A business might require other external approvals depending on the business activity. For instance, from DHA, KHDA, Food Control Department of Municipality, RERA, MIL, MoI and so on.||Free zone businesses must obtain their approvals from the respective free zone authority. They may also need to receive additional approvals based on their activities.|
|Business with Government||Mainland establishments get the privilege to take part in bids/tenders with local companies and government projects.||Free zone establishments can’t participate in bids/tenders with local companies and government contracts.|
|Corporate Bank Account||Opening bank accounts for mainland businesses is usually easier.||Some free zones are preferred by the banks. Dubai-based free zones are usually deemed low risk compared to the free zones based in northern emirates.|
Dubai Mainland Licence Types
You are free to choose any of the three licence types depending on the nature of the business activities you are planning to conduct as a mainland company in Dubai, UAE –
- Professional Licence: Issued to all professionals, specialists, craftsmen and artisans planning to set up a business in Dubai. The purpose of professional licensing is to verify that the individual or business is competent to provide services in a certain profession. Issuance of these licences typically needs the applicant to demonstrate certain skills or training.
- Commercial Licence: Granted to a company planning to deal with buying and selling of goods and commodities, or any kind of trade activities. There are various types of commercial trade licences in the UAE. You must apply for the right type to be able to perform trading activities specific to your business. Broadcast & communications companies, rental transportation services, retail companies, construction companies, healthcare businesses, real estate businesses, and other general trading entities also need to obtain a commercial trade licence to set their business in motion.
- Industrial Licence: Provided to business persons willing to conduct industrial or manufacturing-based activities in the UAE, such as the conversion of natural materials or incorporation of natural resources into their end products. The licence is dispensed by the DED but additional approvals might be required from the Ministry of Finance, the Ministry of Energy and Infrastructure and other authorities, depending on the industrial activity involved.
Can Dubai mainland Licence holders do business in other UAE emirates?
Your mainland business licence, regardless of what type you chose, is the key that gives you access to the Local Market. With your mainland company licence, you have the leg up on doing business not just within Dubai, but also across the UAE without any restrictions.
Dubai Mainland Licence Cost
Dubai Professional Licence Cost: The professional licence in Dubai can cost you around AED 15,310 which includes the costs of professional license fees, service agent fees, trade name fees, market fees (depending upon the tenancy amount), administrative service fees, government cultural fees and local fees, etc.
Dubai Commercial Licence Cost: The cost of a commercial licence in Dubai can be anything between AED 15,000 and AED 50,000 depending on a variety of factors including the type of business activities the applicant is planning to carry out. The cost of DED trader Licence is AED 1070 excluding the Dubai Chamber fees i.e., AED 300.
Dubai Industrial Licence Cost: The cost of industrial licence can go beyond AED 35,000 in Dubai, UAE taking into account the costs associated with additional permits and registrations, as well as the cost of leasing office space, in addition to the cost of the trade licence fee.
100% foreign ownership in Dubai Mainland
Thanks to the recent amendments made to the Commercial Companies Law (CCL) that expatriate mainland business entities from 1 June 2021 onwards can relish 100% ownership control of their business for more than 1000 commercial and industrial activities in any emirate of the UAE. This means full foreign ownership is not allowed for ‘professional licences’ in the UAE. The new changes were introduced by the Federal Decree-Law No. (26) of 2020 that amended some provisions of Federal Law No. (2) of 2015 on +commercial companies. In addition to complete foreign ownership in the UAE mainland companies, the branches of foreign companies in the UAE are now exempted from the mandatory requirement of appointing a ‘National Service Agent’ (NSA). However, in certain activities, the entity must appoint a local service agent even though ownership of the company belongs to foreign investors. The type of business you set up in the UAE will decide whether you require a national service agent. An LSA, on the other hand, does not maintain shareholding authority and rather acts as the company representative in all administrative dealings with government departments.
The Emirates of Abu Dhabi and Dubai have recently made public their lists of 1,000+ approved activities each across a wide variety of sectors that are open to 100% ownership by foreign investors. Business activity categories vary across both Emirates, but those featured in the lists include:
- Maintenance & repair (Abu Dhabi only)
- Hospitals (Abu Dhabi only), and
- Investment & trade (Dubai only)
Although numerous sectors are covered by the company registration authorities’ lists, certain industries such as finance, banking and insurance will continue to be subject to at least some portion of mandatory shareholding by Emirati partner/s in the two most extensive emirates. You may always seek professional help in Dubai to figure out whether your business activity qualifies for 100% ownership or not before setting up the company.
Dubai mainland company formation process
You can mainly form four types of mainland companies in Dubai – Limited Liability Company (L.L.C.); Professional Firm / Civil Company; Branch of Foreign company and Representative Office. The UAE Government launched the Bashr service, an integrated eService, which allows entrepreneurs to establish their businesses in the UAE within just 15 minutes through a unified online platform connecting to federal and local government entities, which provide commercial licence services. Below are the steps to start a business in Dubai mainland:
Determine business activity
You need a trade licence to be able to operate your desired business activities and to determine the type of licence (whether industrial, commercial, professional, tourism, agricultural or occupational) you have to first identify the nature of your business. There are more than 2,000 business activities to choose from in the UAE. You may have more than one business activity.
Decide the legal structure
The next step after determining the trade licence type to apply for is picking the legal form of the company. Depending majorly on the business requirements, the legal structure of the company is the basis for determining applicable laws and regulations. Make sure the legal form of the business matches the business activity. Here is the list of legal forms to choose one:
- General partnership
- Limited partnership
- Limited liability company (LLC)
- Public joint stock company (PJSC)
- Private joint-stock company (PrJSC)
- Civil company
- Local company branch
- GCC company branch
- Foreign company branch
- Free zone company branch
- Sole establishment
- Holding companies
Register the trade name
Give an appropriate name to your Dubai company that reflects its nature and the form and complies with the UAE trade name rules and regulations. You may apply for the trade name through Dubai Economic Departmentusing either its website or mobile application. The trade name you choose must be followed by the business structure acronym (such as LLC, EST, PJSC, PrJSC) and must not violate the public morals or the public order of the country. Make sure your trade name has not been previously registered by any other entity and does not contain names of any religion, or governing authority, nor names or logos of any external bodies. During the application process, you will be issued a payment voucher or a transaction number, which you will need to use as a reference when you pay. A qualified business consultant in Dubai such as Adam Global can not just help you find the right name for your dream business, but also register the trademark with the Ministry of Economy.
Apply for initial approval
To proceed further in setting up a business in Dubai, you have to take an initial approval, which means the UAE Government has no objection to the business being established in the country. You still have to gain the authority to run or practice the business activity, even after obtaining the initial approval. Make sure you have the approval of the General Directorate of Residency and Foreigners’ Affairs to be able to apply for the initial approval. Some activities (such as activities related to legal affairs, security affairs and financial securities and commodities) demand additional approvals from government entities pertaining to that specific business before applying for the initial approval.
Complete and sign MOA & LSA
A completed and signed Memorandum of association (MoA) or a local service agent agreement (if applicable) of the establishment is needed if the legal structure of your business is either Limited partnership, Limited liability company (LLC), Public joint-stock company (PJSC) or Private joint stock company (PrJSC). In order to prepare and attest MoAs and agreements you have to approach a law firm, court or notary public in Dubai or simply a business setup company in Dubai such as Adam Global.
Find a perfect business location
Businesses in the UAE are required to have a physical address to operate. The business premises and location you lease must be in line with the requirements outlined by DED as well as the land planning regulations of the Dubai municipality. You have to submit the office and warehouse rental agreement for approval. For company formation in mainland Dubai, the agreement must be registered with Ejari.
Obtain additional government approvals
There are some specific trade activities that need additional approvals from regulatory bodies concerning those activities. These are the Ministry of Interior, Ministry of Justice, Telecommunications & Digital Government Regulatory Authority (TDRA), Legal activities & legal consultancy, Ministry of Economy, Supreme Petroleum Council, Executive Council, Local health departments, & Local municipal department, just to name some.
Pay, sign & collect the Dubai business licence
After completing the above steps, you can collect the business licence along with all the corporate documents from service centres of the economic departments or through their websites. You must pay for your trade licence within 30 days of receiving the payment voucher, otherwise, the application will be cancelled.
Documentation for mainland company setup in Dubai
The documents you require for acquiring a licence for all legal forms are listed below:
- Initial approval receipt and all the previously-submitted documents
- Copy of the lease contract duly attested by the Real Estate Regulatory Agency (RERA) in Dubai
- Duly attested memorandum of association (for all types of companies)
- Approvals from other government entities concerned, as may be required
- Duly attested service agent contract (for civil establishments and companies that are 100% owned by non-GCC nationals) in the UAE, involving a local service agent
Meet your mainland business setup specialist in Dubai
A good location decision stays with you forever. So do we as your business setup advisor! At Adam Global Dubai, we take pride in being able to guide investors and establishments into making the critical transition to markets, giving businesses the most important market entry strategies to enable them to thrive. Adam Global with its mixed bag of expertise in diversified fields helps clients in every aspect, from licence/permit acquisition to office space requirements, bank account opening and advice on ongoing compliance procedures. Our expert tax consultants in Dubai prepare you for VAT and the upcoming corporate tax. Our qualified Dubai business advisors are poised to assist you to receive all the benefits of doing business in the United Arab Emirates, no matter what emirate you choose for your business. Call us right away to know how can we help you establish and run a mainland company in Dubai. Your first no-obligation consultancy is on us!