Each year, many entrepreneurs face the dilemma of choosing the right location for their business set up in Dubai. They always contemplate which area, free zone vs mainland Dubai will favour their business. And it’s only right to consider all your options when both the regions have their own set of advantages.
While Dubai free zones like DMCC has played a major role in developing UAE and UK relations and is currently home to nearly 2000 British companies, Dubai mainland is one of the most preferred locations for international trade.
If you too wish to set up a business in Dubai but don’t know which of the two, free zone vs mainland Dubai, will be the best option for you, don’t worry! This blog will walk you through the significant differences, advantages and disadvantages of company formation in both regions. So, let’s start with understanding free zones and the mainland region in Dubai.
Free Zone vs Mainland Dubai, What’s the Difference?
Most of the businesses in Dubai choose to either establish themselves in a mainland region or a free zone. But, what’s the difference between the two options?
Mainland companies in Dubai are essentially inland or onshore companies. They can trade or conduct their business activities within the local market and outside the United Arab Emirates without any restrictions. Mainland companies acquire their business licence from the DED (Department of Economic Development). Moreover, they must pay a 5% customs duty on imported goods.
Dubai Free Zone
There are more than 30 Free Zones operating in Dubai. They are independent business entities with their own unique set of rules and regulations. Moreover, all the free zone companies acquire their licences from their governing authority. Free zone companies are allowed to trade with other companies in their own free zone and internationally.
But they don’t have permission to trade directly with customers in Dubai and the UAE mainland. According to Arab News, over 60,000 free zone businesses registered in the UAE in 2021 – a 4.4% increase from the previous year. This increase in number shows just how popular Dubai free zones are.
With that said, the major difference between a mainland company and a free zone company is that free zone Companies cannot conduct their business operations in the non-free zone. In contrast, mainland companies can freely operate their business activities anywhere in the UAE and internationally. Now, let’s get you acquainted with some of the legal company structures in the mainland and significant Dubai free zones.
Major Company Types in Dubai Mainland
- Sole Proprietorship: A business owned by an individual, not a company. Moreover, it offers 100% ownership for a single investor.
- Limited Liability Company: One of Dubai’s most preferred legal structures for business setup. The reason being, it mixes elements of partnership and corporate structures.
- Branch of a foreign company: Carry out professional activities in addition to a few commercial and industrial activities.
- Representative Office: A representative office isn’t a business structure, but it’s a business activity that a branch can conduct.
- Civil Company: It is a business partnership for professionals such as lawyers, doctors, engineers, accountants, etc.
Major Dubai Free Zones
Following is a list of some of the essential free zones operation in Dubai:
- International Free Zone Authority (IFZA)
- Dubai Multi Commodities Centre (DMCC): Commodities Trade and Exchanges
- Jebel Ali Free Zone (JAFZA): General Trading, Trading, Logistics, Services and Industrial
- Dubai International Financial Centre (DIFC): All Financial Services, Banking and Legal
- Dubai World Central (DWC): Logistics, Aviation, Light industry, Ancillary Services
- Ras Al-Khaimah (RAK): Trading, General Trading, Industrial, Service, and Educational
- Dubai Knowledge Park (DKP): Training, Human Resources Management, and Personal Development
- Dubai Internet City (DIC): Internet and Communications Technology
- Dubai Media City (DMC): All activities related to media and communication
- Fujairah Creative City (FCC): Consultation, Media, Communications, Design, and Technology
- Dubai Healthcare City (DHCC): Medical Education, Heal thcare Facilities, Research, Medical Equipment and Pharmaceuticals.
- Dubai Silicon Oasis (DSO): Telecom, Information Technology, Electronics, and Engineering
Advantages of Dubai Mainland
Dubai mainland is a preferable business set-up location for various reasons. Some of the prominent ones are as follows:
- Tax Exemption: Enjoy exemption from corporate or income tax in a mainland region.
- No Minimum Capital: There is no minimum capital requirement for setting up a mainland company.
- Various Options to do Business: Mainland companies have the liberty to conduct business with other mainland companies in Dubai or across the country.
- Freedom: Mainland companies have the freedom to conduct business internationally.
- Wide and Diverse Scope: mainland companies can cater to a broader UAE economy with more scope for diversity.
- Office Location: Mainland businesses can select their office location anywhere in the UAE. Therefore, allowing them to conduct business not only with the local markets but also to establish multiple branches of their company across the country. Hence, establishing a solid presence in the UAE.
- Contracts: Mainland companies have permission to take over and execute governmental contracts.
- Number of Visas: There is no limit to the number of visas required for a mainland company set up. However, it entirely depends on the office space acquired.
- Currency: There is no currency restriction for a mainland company.
- Profits: Mainland companies can entirely repatriate their capital and profits.
- Audits: No early audits are necessary.
Advantages of Dubai Free Zone
There are several reasons why entrepreneurs often choose free zones over a mainland region. The most prominent ones are as follows:
- Set-Up: The process of setting up a business in a Dubai free zone is straightforward to follow.
- Taxation: The taxation system is one of the fascinating reasons for a free zone company formation. Free zone company formation offers exemption from corporate and personal tax. Moreover, it charges VAT, currently at 5%. Additionally, a free zone set-up also exempts import and export tax.
- Ownership: The foreign investors and entrepreneurs who set up their business in a free zone get 100% ownership of their business.
- Profits: Free zone company formation offers 100% repatriation of capital and profits.
- Workforce: Leverage an economical workforce and a relatively easy recruitment policy.
- Additional Advantages: Get a 25 years lease plan and the possibility of areas for production and assembling.
- Office: Easy availability of high-tech and well-maintained office facilities at affordable prices. Moreover, easily avail of warehousing facilities as per your business activities.
Connect With Shuraa
Now that you’re aware of the major differences and advantages of a free zone vs mainland Dubai, you can easily decide which of the two is suitable for you. But, if you still have any doubts, you can seek help from company formation experts.
Company formation experts at the Shuraa UK branch are well versed in the pros and cons, requirements and the business set-up process for each region. We can walk you through all the necessary information and steps involved in company formation. Moreover, we can clear all your doubts and help you with various company formation formalities like getting permissions, documentation and renting office space. Furthermore, we can get your business licence at highly affordable rates. All you need to do is, give us a call, and we will take care of the rest.