Mainland vs. Free Zone Business in Dubai | PerfectPlus

By thabasheer

29 - 04 - 2022

Free Zone
The Differences In Mainland & Freezone Business In Dubai

The UAE has been a high growth business market, given its business-friendly environment, world class infrastructure, favorable laws that promote trade and investment, and strategic location as a global trading hub. Being one of the world’s most stable economies, it even maintained its resilience amidst the disruptions brought about by the COVID-19 pandemic, showing a promising GDP growth projection of 6.2% for 2022 after its economic contraction of 6.1% in 2020. As the economy returns to pre-pandemic growth levels across all industries, new business opportunities open up in the country, especially in Dubai, a leading global business hub.

 

However, before starting a business in Dubai, one of the most frequently asked questions is whether it is better to establish a company on the mainland or in a free zone. The answer to this question requires a thorough evaluation, which can be accomplished by comparing the two.

 

Mainland Business in Dubai

 

A mainland business is an onshore company registered under the government authority of Dubai, to which the UAE Commercial Agency laws apply. During its formation, it is required to have a local sponsor who holds a 51% share in the company. Moreover, its trade license is issued by the Department of Economic Development of the Emirate, providing it with  restriction-less trading opportunities in such a way that it is authorized to conduct business within and outside the local UAE market. Since Dubai and UAE laws apply to it, it has the following advantages when set up:

 

  1. It has the freedom to do business in any part of the UAE, or even outside the country’s jurisdiction;
  2. It can select a principal office location anywhere in Dubai, and establish multiple business branches therein; and 
  3. It can carry out both private and governmental contracts.

 

Free Zone Business in Dubai

 

The free zones of Dubai are independent entities with their own unique set of rules and regulations. Each free zone comes with its own category, such as healthcare, to which prospect companies must adhere to in setting up their businesses. Since Dubai and UAE laws do not generally apply to them, 100% foreign-owned businesses may be established, but direct trading with the local market is prohibited. Nonetheless, conducting business in this location has the following benefits:

 

  1. Having complete control over the business for foreigners;
  2. Corporate tax exempt, considering that it is governed by its own regulatory authorities; and
  3. Exemption from import and export fees without payment of custom duties.

 

Establishing a Business

 

This overview of the differences between doing business in the mainland and in the free zone may have helped arrange people’s perspective on how  operations are conducted in both locations. However, in reality, setting up a business in either place may involve significant documents and requirements to ensure compliance with their own respective laws and regulations. To get started, it is best to engage the services of business management companies in Dubai like PerfectPlus for a seamless business establishment.

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