The Differences Between Mainland and Free Zone Companies in Dubai

One of the biggest considerations when starting your own business in Dubai is to choose the right type of business entity. You generally have three main choices: mainland, free zone or an offshore entity. Each has its own merits and drawbacks, with the right choice depending on your business activity performed by your company, intended trading partners, ownership structure and other factors. 

So, how do the company types compare, and which one is right for your business? 

Mainland vs. Free Zone: An overview

1. Free zone company

Free zones are economic areas where goods and services can be traded, usually with preferential tax and customs rates. Dubai alone has nearly 30 free zones where you can enjoy  100% foreign ownership, 100% corporate tax exemption, 100% repatriation and capital funds. 

Ownership structure

One of the key benefits of setting up in Dubai’s free zones is 100% full ownership of your business. There is no need for a local sponsor or service agent to start a business. 

Business activity

As a free zone company, you are not entitled to do business in the mainland. If your target market is the UAE, you will need to establish a mainland company with a local sponsor. 

Office requirements

There is a wide range of office space choices available within each free zone, ranging from virtual desks to offices and even flexi-desks. 

Visa requirements

The number of visas granted will differ from free zone to free zone and usually depends on the size of the office space you lease. Typically, free zones in Dubai will permit 3-6 visas. 

At DMCC, the number of visas that your company is eligible for depends on the size of the selected office:

• Flexi desk: up to 3 visas.
• Serviced office: 4 to 5 visas, depending on the office size.
• Physical space: 1 visa for every 9 square meters.

Cost of setup

The cost to set up and run your business in one of Dubai’s free zones varies significantly. Below is a breakdown of the four main fees incurred with Dubai business set-up and operations: 

• Company Registration Fee
• Licence Fee
• Office Fee
• Share Capital

For a more comprehensive overview of how different the company set-up costs are between Dubai’s different free zones, click here.

2. Mainland company

Mainland companies (often referred to as an onshore company) benefit by having access to the local market and internationally. To register as a Mainland LLC company, you must obtain a license from the Department of Economic Development (DED) of the respective emirate.

Ownership structure

As of December 1st, 2020, the UAE passed a law to permit 100% foreign ownership for mainland companies, increasing the appeal for foreign companies

Business activity

Mainland companies are free to do business anywhere in the UAE and are also eligible to operate within any free zone in the Emirates. This form is suitable for companies who want to operate within the UAE, or take on government contracts

Office requirements

Minimum office space requirements are set at a minimum of 200 square feet. Virtual offices are not allowed for mainland companies.

Visa requirements

There are no visa limitations for a mainland company, and the number of residency visas granted is based on the size of leased office space or business facility. The larger the office space, the greater the number of residence visas your company may become eligible for. It is generally calculated as one visa per 80 square feet.

Cost of setup

Some of the initial costs that business owners can expect when setting up a mainland company are: 

• Licence fee - The DED offers various licence options, but the standard trade or service licence is typically 5% of the rent. A General Trading licence, Instant licence, Merchant licence and Launch licence don’t apply to this. 
• Initial Approval from DED
• Dubai Chamber of Commerce
• Approval of trade name
• Office rent 
• Attestation of Memorandum of Association (MoA)
• Drafting of contract and court agreement attestation
• Registration with the Ministry of Economy
• Trade licence fee
• UAE local Sponsorship fees depend on the nature of the business
  
  

Key Differences between Mainland and Freezone Company

Mainland vs Free Zone FAQs

Q: Can I operate in the UAE market with a Free Zone company?

A: Not directly. Free Zone companies are generally not allowed to trade within the UAE mainland unless they appoint a local distributor or agent. To have full access to the UAE market, a Mainland licence is required.

Q: Can I convert a Free Zone licence to Mainland?

A: You’ll need to cancel your Free Zone licence and apply for a new Mainland licence through the Department of Economic Development (DET). It will be treated as a new business setup, with its own approvals and office requirements.

Q: How much does a visa cost?

A: Visa costs vary depending on the free zone, the type of company, and whether it’s a partner or employee visa. On average, you can expect to pay between AED 3,000 to AED 7,000 per visa for a 2-year visa, not including medical tests or Emirates ID fees.

Q: What about offshore companies?

A: Offshore companies are typically used for holding assets, international trade, or tax planning, not for operating a business within the UAE. They cannot have a physical presence or issue visas, and are not permitted to trade within the UAE market. If your goal is to actively do business in the UAE, a Free Zone or Mainland licence is a better option.

Business set up at DMCC

If you’re thinking of setting up a free zone company, look no further than DMCC, the nine-time winner of the Global Free Zone of the Year award. As the world’s leading business hub, we offer industry-focused facilities, access to global markets, and a seamless setup process. From regulatory approvals to banking support and expert advice, our team will guide you through every step.

*The material provided in this blog is for general information purposes only and is subject to change based on government policy and regulations.