Free Zone vs. Mainland: Explained

Dubai is a city known for its rapid development and business-friendly environment, offering various options for company formation. However, Dubai Mainland and Dubai Free Zone are the two primary options for entrepreneurs wanting to mark their presence in the UAE. However, they are often caught up in the debate of comparing Mainland and Freezone Businesses in Dubai. Both jurisdictions have several distinctions in terms of regulatory bodies, ownership, costs, tax benefits, and more.

This blog will highlight the difference between Mainland vs Free Zone Business Setup in Dubai, helping you determine the best option that aligns with your business goals.

Comparing Mainland and Freezone Businesses in Dubai

Dubai Free zone

Free zones are designated areas within the Emirate that offer a variety of benefits to investors and businesses, such as 100% foreign ownership, full repatriation of profits, and exemption from import and export duties. These zones are industry-specific with their own infrastructure, regulations, and business environment, allowing companies to operate with flexibility.

There are 40+ free zones in Dubai, each catering to a specific industry. Some of the popular free zones are listed here:-

International Free Zone Authority (IFZA): An ideal destination with top-tier infrastructure, cutting-edge amenities, and regulatory frameworks favorable for businesses.

Jebel Ali Free Zone (JAFZA): A multi-purpose zone catering to a wide range of industries, including manufacturing, logistics, and trading.

Dubai International Financial Centre (DIFC): A leading financial center in the Middle East catering to a wide range of financial services, including banking, insurance, etc.

Dubai Internet City (DIC): A hub for technology and media companies with services like data centers, co-working spaces, and business support.

Dubai Media City (DMC): A one-stop shop for media and entertainment companies offering a range of facilities, including studios, production facilities, and post-production services.

Key features of Free Zones

100% foreign ownership

Exemptions from several taxes for a specified period

No restrictions on the transfer of capital or profits

Quick and easy setup process

State-of-the-art facilities and services

Major transportation hub

Located at the crossways of Europe, Asia, and Africa

Benefits of business setup in Dubai Free Zone

Companies are exempt from several taxes such as corporate income tax, import or export taxes, and other taxes. 

The business setup process in a free zone is relatively quick and easy. 

The strategic location of Dubai provides easy access to markets in the Middle East, Africa, and Asia. 

Free zones offer world-class infrastructure to businesses, such as varied office spaces, warehouses, and logistics facilities. 

The government of Dubai is supportive of businesses in free zones.

Setup and operational costs are relatively low in free zones.

Dubai Free Zone Company Setup Process

Research comprehensively and select a free zone best suited to your business activity and needs. Make sure that your desired activity is permitted in the selected zone. 

Certain activities may require special approvals from appropriate authorities. 

Submit the required documents and application to the respective Free Zone Authority. 

Upon approval, pay the relevant fees and receive your business license. 

Open a corporate account to manage your company finances. 

Apply for visas and residence permits for employees.

Set up your office and begin operations. 

Dubai Mainland

The mainland is established outside of the designated Free Zones and within the general UAE jurisdiction. Unlike Free Zones, the mainland is governed by the UAE Commercial Companies Law. It accommodates a wide range of business activities and offers several advantages. Moreover, the companies operating in this region are allowed to trade directly with the UAE market and conduct business with government entities.

Benefits of setting up a company in Dubai Mainland

Foreign investors and entrepreneurs are offered complete foreign ownership and control of the company.

Companies in Dubai Mainland can operate in a diverse range of industries.

Mainland businesses are permitted to trade freely and offer services within the entire UAE.

Companies in the Mainland enjoy more flexibility in terms of location, business structure, and branch establishment within the country.

Mainland companies can bid on and secure government contracts.

Dubai Mainland Company Setup Process

Choose a suitable business activity from the DED’s list of approved activities.

Opt for an appropriate legal structure. 

Reserve a trade name for your company. 

Submit the application and documents to the Department of Economic Development (DED). 

Secure an office space and obtain the lease agreement. 

Fulfill all requirements and pay the final fees. 

Receive your Mainland trade license.

Open a business bank account. 

Apply for employee visas and residence permits. 

Mainland vs Free Zone Business Setup in Dubai

Selecting between Mainland vs Freezone Dubai is a crucial decision for business owners. Understanding the distinctions between these two helps them make informed decisions while planning a business setup in Dubai. So, here are some key factors to look into while comparing Mainland and Freezone Businesses in Dubai:-

Authority and Regulatory Bodies

Mainland companies are regulated by the Department of Economic Development (DED), which oversees the registration and licensing process.

Free Zone companies are governed by zone-specific authorities, who administer the registration and licensing procedures and ensure compliance with Free Zone regulations.

Ownership and Control

Initially, Mainland companies were required to appoint a UAE national who holds at least 51% of the company shares. However, under the new reforms, Mainland companies can also retain full foreign ownership, except for a few restricted activities, such as the oil & gas sector, banking, insurance, etc.

Free zone companies enjoy 100% foreign ownership, irrespective of the activities they are engaged in. This allows international investors to have full control over their business operations.

Business Activity and Licensing

Mainland companies can engage in a wide range of business activities, including industrial, commercial, and professional activities.

On the other hand, free zones need to follow their own set of rules regarding permissible business activities. Each free zone caters to a specific type of business, such as tech, media, manufacturing, etc.

Costs and Cost-Effectiveness

Mainland companies usually involve higher costs due to local sponsorship and office space requirements. However, market access and flexibility are extensive for businesses.

Free Zone company setup is more cost-effective due to lower setup and operational costs, streamlined procedures, and affordable packages. Nevertheless, the local market access is limited.

Tax Benefits and Corporate Taxation

Mainland companies are subject to corporate tax and VAT (Value Added Tax) in the UAE. However, they can benefit from broader economic opportunities.

On the other hand, free zone entities enjoy 100% corporate tax exemptions and tax-free import/export benefits. 

Tips to choose the right jurisdiction for your business

There are several considerations involved while comparing Mainland and Freezone Businesses in Dubai: -

Determine if your business activities are permitted in any of the jurisdictions. If your activity requires direct interaction with the local UAE market, then Mainland is the best choice.

Understand your client base. For instance, if your primary market is the UAE, then a Mainland company is to go for. However, if you want to focus on international markets or niche sectors, then free zones would be a suitable option.

Assess the visa requirements and employee quotas. The visa procedures are straightforward in free zones, however, the visa quotas are often fixed.

Consider your business expansion plans, whether you want to expand your operations across the UAE or internationally. If you intend to focus on deep market penetration, local growth, and business flexibility, then the Mainland would be an ideal choice. On the other hand, free Zone companies are more suitable for international trade, cost-efficiency, and specific operational requirements.

Seek Shuraa’s expert guidance

Navigating the complexities of company formation in Dubai requires professional assistance and expert guidance. Shuraa Business Setup offers specialized services to businesses helping them determine the right jurisdiction for their operations. Their experts not only streamline the setup process but also handle regulatory requirements, ensuring a wise selection that aligns with your business goals.

Contact Shuraa today!