Main Differences Between Dubai Mainland And Free Zone To Setup New BusinessKWSME
If you are looking to setup your business in Dubai, one of the key questions that arise is deciding the operating jurisdiction of your company. Dubai offers multiple options to an entrepreneur, amongst them there are primarily two choices for business location which are; Mainland Limited Liability Company or Free Zone Company. Basically the choice to go for a certain type entirely depends upon the nature of your business and the kind of activities that you want to carry out through your business. For example, if you are a trading company and want to trade within UAE, go for mainland limited liability company. If you want to own your business completely, have control over its operations and take advantage of Dubai’s tax exemptions, go for free zone establishment.
There are quite some differences between both of these forms of company with each having its own benefits and restrictions. Let us explain the most basic but major differences between them in a detailed manner.
Mainland Company in Dubai is an onshore company licensed by Department of Economic Development (DED). Mainland company is not geographically limited to carry out its business operations. It can work in local markets as well as outside United Arab Emirates without any restrictions.
Free Zone Company:
Free Zone Company is established in a separate business jurisdiction called as free zone in Dubai. It is a separate business entity with its own rules and regulations. It is allowed to conduct its business activities inside the free zone or outside UAE. This is the basic difference between mainland and free zone that free zone company cannot work in non-free zone without the assistance of a local distributor or an agent whereas a mainland company can work anywhere in UAE. There are various free zones in Dubai. The main reason that foreign investors go for free zone establishment is to get ownership benefits, utilize the world class infrastructure, protect their assets and enjoy tax exemptions.
Mainland Company restricts the ownership of foreign investor to maximum of 49% and it requires a local sponsor with ownership of 51%. The local sponsor will be a UAE national, whereas free zone establishment grants complete business ownership to foreign investors. Entrepreneur has 100% ownership and control of his business operations.
Mainland Company can do business anywhere in UAE including free zones as well as outside UAE. They can do all commercial, professional or industrial activities except banking and insurance. Operations of Free Zone Company are restricted to free zone only or outside UAE. If they want to go to local market then they will have to seek help from local distributor or an agent. Some examples of companies who might utilize this structure are export and import companies and courier services.
For Mainland Company, there is minimum requirement of 200 sq. ft. to be leased out annually. After that, company will be issued a license by DED. On the other hand, there is no requirement for a physical workplace for free zone companies. They may or may not have physical offices depending upon their work requirement. There is a special service for entrepreneurs in free zone areas which is called “plug in and go” through which licensees can use common business center desks for minimum of 5 hours per week. This measure gives the security to the new market entrants to save on initial costs of registration. This facility is also known as “flexi desks”.
Mainland companies have no limitation for issuance of visas for employees. Ministry of Labor issues an E-quota for main land company which shows its visa eligibility. It depends upon office space. More work space requires more staff so more visas you can get. Whereas for free zone licenses, there are two visas offered for smart office package. In case you want more visas then you will have to lease out physical office space to fulfill this purpose.
Approval from Government Authorities:
In order to obtain license, Mainland Company requires approval from DED (Department of Economic Development), DM (Dubai Municipality), and Ministry of Labor (MOL), Department for Naturalization and Residency affairs of Ministry of interiors or Immigration (MOI). Also for specific business activities e.g. for medical related activities, further approval is required from Dubai health authority (DHA). Free zone companies usually do not require approval from external authorities unless there is some extra special activity which requires approval.
Time Frame to Setup Business:
For Mainland, the time frame for its setup depends upon finding the right local partner as sponsor and for free zone companies it depends upon choosing the right free zone for business operations. Usually it takes between 3 to 6 weeks for both mainland and free zone setups.
These were some of the major differences between both of these forms of company setups in Dubai. If you are looking for more information or need to establish your own company in Dubai, feel free to ask us. We are a team of experienced professionals eager to guide you in all phases of setting up your business enterprise whether it is mainland or free zone.
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