Free zone vs Mainland company in the UAE: Which is right for you?
Dreaming of starting a business in Dubai or the UAE? Choosing the right company setup is one of the most crucial steps.
With the UAE offering tax-free profits, global connectivity, and government-backed support for startups, the right decision between a Free Zone company setup and a Mainland company setup can make all the difference.
This guide will help you understand the differences, advantages, and costs of both options so you can make an informed choice for your UAE business.
1. Free Zone Company
Dubai has over 25 free zones, each designed to attract investors and entrepreneurs. A Free Zone company set up in Dubai provides full ownership and tax benefits.
Ownership structure
With Dubai’s free zone setup, investors enjoy 100% foreign ownership. There’s no need for a local sponsor or service agent to start a business.
Business activity
Free Zone companies cannot trade directly in the UAE mainland. If you intend to target local clients, you will have to form a mainland company through a local sponsor.
Office requirements
Free zones offer a range of office options, including:
1. Virtual offices
2. Flexi-desks
3. Fully equipped office spaces
Your visa quota is linked to the office facility you choose.
Visa requirements
Owners and employees can obtain UAE residence visas, with the number of visas determined by the chosen office facility and workspace type.
Cost of setup
The cost to set up and run your business in one of Dubai’s free zones varies significantly. Below is an overview of the four key costs involved in setting up and running a business in Dubai:
1. Company Registration Fee
2. License Fee
3. Office Fee
2. Mainland Company
A Mainland company in Dubai allows you to trade anywhere in the UAE and internationally. It’s ideal for companies seeking local clients or government contracts.
Ownership structure
Mainland companies allow 100% foreign ownership, except for certain regulated sectors. Some professional licenses require a local service agent without giving them shares.
Business activity
Mainland companies are eligible to operate anywhere in the UAE, including free zones, and can participate in government contracts – a major advantage over free zones.
Office Requirements
Mainland companies in the UAE are required to have a physical office space to operate legally. The office must meet the standards set by the Department of Economic Development (DED).
Visa Requirements
For a mainland company, the number of visas granted is based on the size of the office space. A larger office allows your company to qualify for more residence visas, with one residence visa typically granted for every 80 square feet.
Cost of Setup
The total cost of establishing a Mainland company varies based on factors such as license type, office space requirements, and visa quotas.
Some of the initial costs that business owners can expect are:
1. License fee
2. Initial Approval from DED
3. Dubai chamber of commerce
4. Approval of trade name
5. Office rent
6. Attestation of Memorandum of Association (MOA)
7. Drafting of contract and court agreement attestation
8. Registration with the Ministry of Economy
9. Trade license fee
10. UAE local Sponsorship fees depend on the nature of the business
Mainland vs Free Zone FAQs
Q: Can a Free Zone company trade directly in the UAE market?
No, Free Zone companies cannot conduct business directly in the UAE mainland without partnering with a local agent.
Q: Do mainland companies require a local sponsor?
For most business activities, 100% foreign ownership is allowed. Certain regulated sectors may still require a local sponsor holding 51% shares.
Q: Are 100% foreign ownership options available for both Mainland and Free Zone setups?
Yes. Free Zone companies always allow 100% foreign ownership, and Mainland companies now allow it for most commercial and professional activities.
Q: Can I open a bank account in the UAE with a Free Zone company?
Yes, but banks may have specific requirements for Free Zone companies, such as minimum deposits or a local bank branch presence.
Q: Which is better for government contracts – Mainland or Free Zone?
Mainland companies are permitted to participate in government contracts, whereas Free Zone companies are usually not eligible.
