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Free Zone vs. Mainland: Explanations

When it comes to starting a business, the United Arab Emirates is one of the best places to do so in the Middle East. It is a global center that offers opportunities for different industries and nationalities. Its liberal, stable and business-friendly environment and numerous business development initiatives make it highly attractive to international investors.

You can incorporate your business either in the free zone or on the mainland. Like many of us, you may be asking, "What's the difference between the two?" or "How do I know which one is the right choice?" that need. And in this article we will try to answer these questions. We cover:

• Mainland Business: What is it?

• Free Zone Society: What is it?

• Mainland vs Free Zone: What's the difference?

• Mainland Business Benefits

• Free Zone Business Benefits

• Working in the Creative Zone

Mainland Business: What Is It?

An onshore company is an onshore entity registered with the relevant government agency of the Emirate. The emirate's Department of Economic Development (DED) issues a trading license. A fundamental feature of a mainland company is that there are no restrictions on its commercial activities. However, some business activities require a local sponsor or his UAE national to be a company partner.

Free Zone Society: What is it?

Free Zones are a great alternative to the mainland if you want to keep 100% ownership. Since the opening of the first free trade zone in the UAE in the 1980s, it has grown in size and scope. There are currently over

5 free trade zones nationwide. Each free zone is managed and administered by its own regulatory body and governed by its own laws and regulations.

Mainland vs Free Zone: What's the difference?

So what's the difference between the Mainland and Free Zones? Jurisdictions are very different and each offers a different corporate structure. Below are the main differences to help you decide which one is right for you.

Ownership: Until recently, a foreign investor setting up a company on the mainland could only own a maximum of

9% and had to pass his remaining 51% to an Emirati sponsor. However, the UAE government now allows 100% foreign ownership for some mainland-registered business activities. Free Zones have no such restrictions and enjoy full ownership from day one, so you don't even need a local sponsor.

Scope of Business: A fundamental difference between a mainland company and a free zone company is that a free zone company cannot conduct business outside the free zone without the assistance of a local agent. This restriction does not apply to mainland companies licensed to operate within the United Arab Emirates.

Workspace: Mainland businesses require at least 200 square feet of physical office space. After securing the required space, the DED will issue a permit to your company. It is not mandatory for Free Zone companies to have a physical location, as many Free Zones allow companies to have virtual workspaces.

Visa: Mainland companies are not subject to visa restrictions. However, the number of visas issued depends on the work area. Therefore, if your company needs additional visas, you will first need to acquire or rent a larger workplace. Unlike mainland companies, free zone companies are limited in the number of visas they can apply for. The number of visas available usually ranges from 1 to 6, depending on the free zone regulations.

Company Formation Permit: Mainland companies require regulatory approval from several government agencies. These include the Ministry of Economic Development, Dubai Municipality, Ministry of Labor, etc. By comparison, each free zone follows its own laws and regulations for new companies established in its territory. Additionally, no approval from government agencies or institutions outside the Free Zone is required to incorporate a business into the Free Zone.

Corporate Audit: All mainland businesses are required to prepare a financial audit at the end of each financial year. However, not all free zones require companies to conduct an annual financial audit. Only free zone companies such as FZE and FZCO are required to conduct year-end audits.

Benefits of a Mainland Company

Below are some of the benefits of setting up a Mainland Company.

• Freedom to operate in the United Arab Emirates without restriction

• 100% exemption from corporate and personal tax

• 100% repatriation of permitted profits and capital

• Under contract with the UAE Government Offers and Job Possibilities

• Unlimited number of visas

• You can set up offices in any registered emirate, establish multiple business units and establish a strong local market presence

• Global Unlimited Access Market

Benefits of Incorporating a Free Zone Company

Below are some of the benefits of incorporating a company in a Free Zone.

• Capital and ownership

• 100% exemption from import and export duties

• Shareholder data remains open

• Simple Recruitment Policy

• Free Zone Offers Business Advice and Networking Support

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