Mainland or Free Zone: What's Best for Your Business?

11 August 2022

You can set up your company in either a free zone or the mainland based on your business’s conditions and goals. Therefore the logical question arises: “Which option for setting up my company is better?”

There is no simple answer regarding which option is best as each case requires a thorough assessment and analysis. When considering a free zone or mainland, it depends on your business location scope and the nature of the business itself. So the right question is: “What are the advantages of setting up a company in one of these jurisdictions?”

Below we will look at the difference between UAE mainland and free zone business setup and their distinguishing features in more detail. This will help shed some light on which area would be most beneficial to your company according to your specific requirements.

Mainland vs Free Zone Company

A mainland company is registered with the Department of Economic Development (DED) in each UAE emirate. There are no restrictions on its commercial activities, but, according to the statute, a local sponsor or a UAE national is required to be a partner in the company for some business activities.

A free zone company otherwise keeps you complete 100% ownership. Currently, there are over 40 free zones across the country. Each free zone is managed and administered by its own regulatory authority and functions under its own laws and regulations.

Other key differences

Business scope: A free zone company is allowed to do business only within the free zone or outside the country. This restriction does not apply to mainland companies who have permission to operate everywhere in the UAE and across the globe.

Regulation: A free zone jurisdiction is controlled by private free zone entities that may change the rules applied to the free zone anytime. A mainland company is under the legally contracted terms and controlled by legal governmental bodies that protect you and your company.

Tax exemptions: A free zone company is fully exempt from paying any kind of tax. (VAT is still mandatory for certain thresholds on taxable supplies and imports.). A mainland company currently has zero corporate tax. However, according to the recent changes in UAE laws, mainland businesses will have to pay 9% tax from the year 2023 for most activities.

Share capital: There is no standard requirement of minimum share capital for mainland companies. Most free zones do not require paid-up share capital either. However, there is a share capital deposit proof in some free zones and the amount varies.

Visa eligibility: Mainland companies do not have any restrictions on visa eligibility, while free zone companies have. The visa packages may vary based on the free zone jurisdiction.

Financial audit: Financial auditing is mandatory for mainland businesses. As for free zones, not all entities are required to undertake them.

Setup time: It usually takes about 3-5 days for a free zone trade license to be issued. For the mainland, this time is usually about 5-10 days.

If you need more clarifications or help on your entrepreneurial journey - contact our consultant. Call/WhatsApp us on +971 50 908 1938. You may also email us on support@palladiumgroup.ae