Governmental encouragements, tax advantages, thoughtfully-organized infrastructure, technological advancements, tons of opportunities, the whole nine yards – it is not difficult to see why investors from the world over are enamoured of Dubai. Choosing Dubai for business setup or expansion is not as tricky as it is to choose a site for a business in Dubai, for sure. Now coming to the $64,000 question. Which area is the best for my new business setup – Dubai Mainland or Free Zone? If you ask to put in our two cents, we say you know better than anyone else. Here’s how. The choice between the mainland and a free zone setup is entirely dependent on the type of activities and business you want to pursue. Simply put, if you wish to conduct business in the UAE, you must choose a mainland setup, however, if you want complete ownership and control over your business operations, a free zone setup should be your first pick. Both the sites have their own set of pros and cons, as well as investment potential, and both are meant to lure different sorts of entrepreneurs.
Prospective investors who are raring to start a business in Dubai are in a fix about the location for their Dubai company. It’s the location that can make or break the business. Take this with a pinch of salt. Finding a perfect site for your start-up, with no doubt, is crucial, but every business has different goals, requirements, and target audiences. One site which can be the best pick for real estate business can’t be that profitable for a water plant. A business person should first create a checklist of priorities and then opt for the area that checks all the boxes. The priorities must be set on a scale of certain parameters that can affect the business in the short or long term. For instance, ease of setup, degree of ownership, no or minimal tax liability, various tax exemptions (import-export duty, corporate tax, etc.), fully repatriated profits, free fund transfers, cost-effective workforce, lease term, capital required initially, no. of visas you need to sponsor, currency restrictions, market reach, level of restrictions, and so on. Free zone and the mainland, each location has its own bundle of benefits. After learning what site offers what, you’ll be in a better position to decide the location for your start-up company. And that is what we are here for. Let’s take a look at some of the major differences between the free zone and mainland establishments in the UAE.
If you are happy to stay within the boundaries of the United Arab Emirates, go for free zone business formation. On the other hand, if you want to restrict your business want to make it reach outside the UAE then mainland business formation is the best bet for you.
Business Formation in Dubai Mainland
Gone are the days when foreign investors were only eligible to own a maximum of 49% share of their business establishment in the UAE mainland, the UAE government has allowed for 100% foreign ownership for the businesses located on the mainland. The world turns into your oyster with a Dubai mainland setup when it comes to market reach, as you can operate in the local as well as the global market.In addition to that, the mainland corporation offers foreign investors and local sponsors a bespoke legal arrangement, according to which the UAE sponsor is paid an annual fee or a percentage of sales/profits. The foreign investor can conduct their business without any inference of the local partner, which simply means they have complete control of the company and the local partner is not engaged in the day-to-day business operations. The Department of Economic Development (DED) is responsible for registration, licensing, commercial compliance, and consumer protection for mainland businesses in Dubai.
Benefits of Mainland Company Formation in Dubai
Because of the huge benefits, most foreign investors choose to set up their company in Dubai mainland.
- First and foremost, mainland establishments in Dubai are exempt from corporate tax.
- Owners of mainland companies can now bask in the bliss of 100% ownership of it.
- You will be happy to know that establishing a mainland company won’t break the bank, as the minimum capital requirement for mainland business is 0%.
- Unlike Dubai free zone corporations, mainland business owners get the full-fledged freedom to conduct business not only in Dubai but also in any seven emirates (Abu Dhabi, Sharjah, Ras Al Khaimah, and Ajman, Umm Al Quwain, Fujairah) and beyond. In a nutshell, a mainland company is allowed to do business both inside and outside the UAE.
- Mainland establishments can have their hands on a wide range of options/opportunities for conducting business, as nothing stops them to cater to the large UAE economy.
- The benefits keep getting better with the availability of a variety of office locations in Dubai to choose from to open branches anywhere in the UAE. This means you will be spoilt for the choices while planning to create a strong presence in the nation.
- Mainland businesses enjoy a hundred percent corporate tax exemption, generating a favourable business outcome. Such is not the case for foreign investment in numerous countries across the world.
- Mainland corporations qualify to work on government contracts, unlike free zone enterprises that are only allowed to work on private commercial projects.
- With a mainland business license, an expat business owner has no restrictions on the number of visas that can be issued. However, obtaining permits for mainland companies totally depends on the size of office space purchased. Bigger premises mean more visa eligibility.
- Talking about physical office space, a minimum of 140 sq. ft office space is obligatory for a UAE mainland company.
- The UAE Government puts no currency restrictions for mainland companies in the UAE, whether they are operating the business in Dubai, Sharjah, or Ajman, the advantage of Dubai mainland company formation allows them to bask in zero currency exchange restrictions.
- Dubai mainland enterprises and counterparts all across the seven Emirates are provided income tax exemptions. Beneficial tax exemptions ultimately result in the business owner being entitled to complete repatriation of all capital and profits.
- The registration process for mainland businesses is simple and does not require a yearly audit.
- The legal process of setting up a business in Dubai mainland is an easy breeze, and the visa processing is also seamless. The procedures facilitate the investors and business professionals to set up ventures and get started with operations as soon as possible. And the cherry on the top is that the nation does not even need yearly audits. These flexible features are inducements to promote Dubai Mainland company formation and empower foreign entrepreneurs to operate directly with the local market.
Benefits of Business Formation in Free Zone
Expat business investors choose to invest in a free zone venture for a variety of reasons, such as complete ownership privileges, access to world-class infrastructure, asset protection, and tax incentives, to name a few.
Functioning under its own set of rules and regulations, a free zone corporation is a separate legal body. There are about 45 free zones in the nation and each free zone is allowed to conduct business both within and outside the UAE. Like mainland companies, free zone enterprises cannot operate in a non-free zone without the support of a local agent. Check out the below-mentioned points to learn how free zone companies are different from mainland establishments:
- Foreign investors can purchase the whole company and enjoy complete ownership. This means they are not obligated to assign the shares to a UAE local sponsor.
- The tax system is by far the most challenging justification for founding a firm in a free zone. The establishment of a free zone gives 0% business and personal tax, as well as a 5% VAT exemption.
- It’s possible to form a free zone company even without premises. Yes, in the case of the UAE free zone, a physical office space requirement is not obligatory. The formation of virtual offices is permissible.
- It’s the Emirate in which the company is formed that determines the minimum capital prerequisite of a free zone company
- Free zone companies have certain restrictions when it comes to visa eligibility. Up to 6 visas are allowed, in ordinary cases. The UAE visa packages vary with the free zone jurisdiction. In order to meet the additional visa requirements, you need to lease out extra work premises.
- Capital and profits are fully repatriated here also.
- You can transfer funds completely free of charge.
- Import and export duties are fully relinquished.
- Free zone company formation takes lesser time than company formation outside of the city
- Free zone business owners can take advantage of a cost-effective workforce and a reasonably simple recruitment process
- The mainland companies need to seek approvals from various government bodies like the Department of Economic Development, Dubai Municipality, Ministry of Labour etc.
- There is a 25-year lease plan, warehousing facilities, and the possibility of production and assembly spaces, among other things.
- Each free zone has a set of rules and regulations applicable to all the companies that are formed within the jurisdiction of the particular free zone. External approvals from government bodies and agencies that do not belong to the free zone are not needed for the free zone company setup.
Meet Adam Global
Planning a business means that there are a million decisions to make, and little details to iron out. You would not board a bus without knowing where it is going or if your destination comes in its route. Finding a great location for your business in Dubai is no less than scoring a pearl of great price. Therefore, having a clear and precise understanding of the different business jurisdictions in the UAE is of utmost importance to make it to your business goal. And for that, all you need is an experienced business setup consultant in Dubai by your side to help you know the facts, the basic laws, rules & regulations, plus the contrasts between these jurisdictions – Mainland, Free Zone and Offshore. Every option has its crystal-clear advantages, depending on the scope and requirement that you bring up in your company registration. However, picking out one for your business is a bit bewildering. Allow us to assist you in figuring out whether a mainland business setup or a free zone business is advantageous for you and your business.