UAE Mainland vs Free Zone Company Registration: Which is Right for You?

Deciding to set up a business in the UAE is a big step, but it can be a daunting task with so many options available. One of the most significant decisions you will have to make is whether to register your company in the mainland or a free zone. Both have their advantages and disadvantages, and it’s essential to understand the differences between the two before making a decision.

The UAE mainland is the most popular location for company registration in the UAE. It is the area outside of designated free zones and is subject to UAE Federal Law. Companies registered in the mainland are free to conduct business anywhere in the UAE and can also operate within any free zone in the emirates. However, mainland companies have a mandatory office space requirement, which can increase the cost of setting up a business.

In contrast, free zones were established to attract foreign investment and offer a range of benefits to companies. These include 100% foreign ownership, no corporate or personal tax, and no restrictions on hiring. Additionally, companies registered in free zones can enjoy 100% exemption from import and export duties and have access to international markets. However, free zone companies are limited to conducting business within the free zone and cannot operate outside of it without a mainland partner or agent.

Mainland Company Registration

When it comes to company registration in the UAE, businesses have the option to register in the mainland or in one of the many free zones. While free zones offer a range of benefits, mainland company registration also has its advantages. In this section, we will take a closer look at the requirements, process, benefits, and limitations of mainland company registration.

Requirements

Unlike free zone companies, mainland companies require a local sponsor or service agent who will hold a 51% share in the company. The remaining 49% can be held by foreign nationals or companies. Additionally, mainland companies must have a physical office space in Dubai, which is not required for free zone companies.

Process

The process of registering a mainland company involves several steps. Firstly, the company must obtain initial approval from the Department of Economic Development (DED). This involves submitting the necessary documents, including a business plan and lease agreement for the office space. Once the initial approval is obtained, the company must then register with the DED and obtain a trade license. The process can take up to two weeks.

Benefits

One of the primary benefits of registering a mainland company is the ability to do business anywhere in the UAE. Unlike free zone companies, mainland companies are not restricted to operating within their specific jurisdiction. Additionally, mainland companies have access to a wider pool of talent and resources, as they can hire both local and foreign employees.

Limitations

One of the main limitations of mainland company registration is the requirement for a local sponsor or service agent. This can make it difficult for foreign nationals to have full control over their company. Additionally, the process of registering a mainland company can be more complex and time-consuming than registering a free zone company.

Free Zone Company Registration

Free zone company registration is an excellent option for entrepreneurs who want to set up their business in the UAE. A free zone is a designated area where foreign investors can own 100% of their business without the need for a local sponsor or partner. Here are the requirements, process, benefits, and limitations of registering a free zone company in the UAE.

Requirements

The requirements for registering a free zone company in the UAE are:

Submit a completed application form
Submit a business plan
Submit a copy of the passport of the shareholder(s) and director(s)
Submit a bank reference letter
Submit a no-objection certificate from the current sponsor (if applicable)
Submit a lease agreement for the office space in the free zone

Process

The process of registering a free zone company in the UAE is straightforward and can be completed within a few days. Here are the steps:

Select a free zone
Choose a company name and get it approved by the free zone authority
Submit the required documents and pay the registration fee
Obtain the trade license and other necessary permits
Open a corporate bank account

Benefits

The benefits of registering a free zone company in the UAE are:

100% foreign ownership
100% repatriation of capital and profits
No personal or corporate taxes
Easy company setup process
Access to world-class infrastructure and facilities
Ability to trade freely within the free zone and internationally

Limitations

The limitations of registering a free zone company in the UAE are:

Restrictions on doing business outside the free zone
Limitations on the number of visas that can be obtained
Higher operating costs compared to mainland companies
Less flexibility in terms of business activities
More limited access to the local market

Comparison between Mainland and Free Zone Company Registration

Ownership and Shareholding

One of the primary differences between Mainland and Free Zone company registration is the ownership and shareholding requirements. In the past, Mainland companies were required to have a local Emirati sponsor who owned 51% of the share, however, this is not the case anymore. Since November 2020, many activities are allowed to have 100% ownership in the mainland. On the other hand, all companies set up in UAE Free Zones can have 100% foreign ownership.

Visa and Residency

Another key difference between the two types of company registration is the visa and residency requirements. Companies registered in Free Zones can obtain visas for their employees without the need for a local sponsor. In contrast, Mainland companies require a local sponsor to obtain visas for their employees. Additionally, Mainland companies have more stringent residency requirements compared to Free Zone companies.

Taxation

When it comes to taxation, Mainland companies are subject to UAE corporate tax, which is currently set at 20%. However, Free Zone companies are exempt from corporate and income taxes for up to 50 years. Free Zone companies are also exempt from customs duties and value-added tax (VAT) for goods and services that are imported or exported through the Free Zone.

Business Activities and Operations

Mainland companies are free to do business anywhere in the UAE and are eligible to do business inside any Free Zone in the Emirates. In contrast, Free Zone companies are restricted to doing business only within the Free Zone where they are registered. Additionally, Mainland companies have a mandatory office space requirement, whereas Free Zone companies do not have this requirement.

Company Setup Cost and Renewal

The cost of setting up a company in the UAE varies depending on the type of registration and the location. Generally, setting up a Mainland company is more expensive than setting up a Free Zone company due to the additional costs associated with local sponsorships and office space requirements. Additionally, the renewal fees for Mainland companies are higher compared to Free Zone companies.