Business in Dubai- the difference between free zone and mainland company

“What is the difference between mainland and free zone companies?” is a common query by many potential investors looking to break into the UAE market. From an investor’s perspective, not having a straightforward and precise understanding of the various business jurisdictions in the UAE is similar to boarding a cart without knowing its destination.  

To help you figure out the main differences between the two we’ve put this blog post at your fingertips…

UAE Mainland Company 

A mainland company is simply an onshore company that is registered under the government authority of the concerned Emirate. The trade license is issued by the Department of Economic Development of the particular Emirate. 

A mainland UAE business is primarily distinguished by its trade without restrictions-less trade opportunity. When a foreign investor invests in a mainland business in the UAE, the company is allowed to trade both locally and internationally.

Free zone Company

A free zone company is established within a special jurisdiction that falls under the jurisdiction of a specific Emirate. There are currently over 40 free zones in operation throughout the UAE. Free zone jurisdictions have their own set of rules and are governed by the Free Zone Authority, a government regulatory body. The issuance of trade licenses is the responsibility of the Free Zone Authority… The UAE Free Zone is in charge of issuing trade licenses. A free zone business is only allowed to trade inside the free zone and not with the rest of the UAE.

A UAE-free zone is characterized by the benefits of 100% foreign ownership and tax concessions. A free zone company is authorized to trade only within the free zone and outside the UAE. 

Now let’s dive a little deeper in the differences between the two…

Ownership of Business

In terms of business ownership, in the mainland company, foreigner it is obligatory that a minimum of 51% of the total company shares has to be allotted to a UAE local sponsor and the remaining 49% is owned by the foreign investor.

While in the free zone Company, the foreign investor can have complete ownership of the company It is not necessary to assign the shares to a UAE local sponsor. As a result, the position of a local sponsor is irrelevant in this situation. 

 Scope of Business 

When talking about the scope of business, A company registered on the UAE mainland is free to do business anywhere in the country. This ensures the firm is permitted to conduct business both within and outside the UAE.

While Companies incorporated in each of the UAE free zones are subject to certain limitations. Companies registered in a free zone are permitted to conduct business both inside and outside the UAE.

Office Space

When referring to office space, a minimum office space requirement of 140 sq. ft is needed for a UAE mainland company, while a free zone business is not required to provide a physical office room. It is possible to establish a free zone business with or without premises. Digital offices are permissible in the UAE free zone.

Visa Eligibility

There are no visa requirements for mainland companies in the United Arab Emirates. The number of visas issued is determined by the size of the workspace. This means that if the company’s owner needs more visas, he or she can have more jobs.

While companies incorporated in each of the UAE free zones are subject to certain limitations. Companies registered in a free zone are permitted to conduct business both inside and outside the UAE.

These were the main points that will help you differentiate between types of businesses in the UAE, which will put you on track to start your own business.

Start planning for your business now and when you face any challenge feel free to contact us