Dubai is one of the finest business destinations and the most talked currently with the world expo coming. It is often confusing for the investors as to where to setup the company once they finalize the country. United Arab Emirates, comprises of 7 emirates and each of them having a Department of Economic development commonly called as Mainland and several Free zones. It is often a big question for all the entrepreneurs on the topic which jurisdiction meets their criteria and what are the pros and cons of it. This blog highlights on the striking differences between mainland and a freezone company setup.
Mainland Company: A mainland company formation is an onshore license registered with the department of Economic development and majorly suited for the businesses looking to have a local presence with the Local market transactions as well as outside the country transactions without any restrictions.
Free zone Company: A free zone company setup is generally for the businesses majorly focused on outside country transactions like import / export and are allowed to do business only with the designated zone and Outside UAE. In case of a Free zone company looking for any local market business they can do so by appointing a distributor registered in the Main Land.
Currently the legal frame work and the costs of both Mainland and the free zone companies more or less similar and the decision of which to opt completely depends on the business model.
Differences between the Mainland Company and a free zone Company are:
- Nature and Scope of Business
A Mainland company has a freedom of business, can freely do its business in the local market, can have agreements with the free zones as well as do business outside UAE without any restrictions. It has a presence in the Local market.
Whereas a Free zone company can do business only within the designated free zone and outside UAE. In case of wanting to have any local business transactions, then the business needs to appoint a Local distributor / Agent to conduct its business locally by clearing the goods from the free zone port by paying 5% customs. - Ownership
A Mainland company requires a UAE National either as a Shareholder or as a service agent. All the commercial licenses requires a Local Partner owning a 51% of shares and all the professional licenses requires a Local Agent. In case of commercial license a protection side agreement is signed to protect the 51% shares mentioned on the UAE National and either cases a fixed Annual remuneration is paid against the shares and the agent ship.
Whereas a Free zone company is owned 100% by the expatriate without any interference of a UAE national. The legal type of the company depends on the number of shareholders in the company. - Office Space
A Mainland Company has a freedom to choose an office anywhere in the selected Emirate as per their requirement on the location and the size. The department of economic development Dubai in particular has come up with options like flexi desk and shared premises to encourage new startups to opt for mainland so that they could save on the costs. For certain activities there is also an option to go for an INSTANT LICENSE SETUP which is you don’t require an office completely for the first year.
Whereas in Free zone you have both the options of Flexi desk and the office but the office has to be selected only from the designated free zone out of the limited options available. The flexi desks are more like a virtual office just to issue the License and can be used on 5 hrs/week. - Eligibility for the Visa
A Mainland company can have 2 partner Visa’s in the company if the partners names appear on the trade license. In case of more than 2 partners as well a maximum of 2 can be availed. Regarding the employment visas, it depends on the size of the office. Every 9 sq.mt of the office size can have 1 employment visa.
Whereas the free zone’s visa criteria completely depends on the number of Visa package availed by the company. The Visa packages starts from 1 -6 with different free zones. In the case of free zone companies registered on the physical office, then the same criteria of 9 sq.mt per visa applies.
In case of both Mainland Company as well as a free zone company, certain activities have external approvals from different external governing bodies depending on the activity.
It is really a difficult task to say which one of the both is the best jurisdiction to have business. As mentioned above the decision of which one among the both to choose completely depends on the business model and the facilities requirements of the business owners.
To know more in detail about the advantages and disadvantages of having a business setup in Dubai feel free to discuss your business plan with us and get a FREE CONSULTATION by calling us on +97145804048 or drop us an email on [email protected]
