Difference between mainland and Freezone in UAE
One of the first things to decide when setting up business in Dubai is the location of your business; currently, there are mainly three options: on the mainland, in free zones, or offshore. Each location has advantages and disadvantages, and depending on the type of business, the location you choose will determine the future of the venture. To make a well-thought-out decision on the location to setup your business in Dubai, you need to know what the differences are between these locations, mainly between freezone and mainland.
Mainland
Mainland is the region that is outside the freezones and is regulated by the Department of Economic Development (DED). All the business licenses are issued by the DED, and the businesses can easily access the local markets for their activities. Combined with up-to-date technology and facilities, the Dubai mainland is a haven for businesses that want to grow and expand.
With the latest amendment in the UAE company policies, it is possible to have 100% ownership of business operating in certain industries. Limited Liability Company (LLC) or a branch company are the most common type of businesses in UAE. Now let us discuss about the pros and cons on starting a business in mainland Dubai.
Pros
• Easy to setup business- The processes are more straightforward and simpler.
• 100% ownership for businesses unless there is any special restriction
• No need of local service agent- Due to the complete ownership option, there is no longer a need for a local service agent to register the business
• Chance to work along with other mainland companies and government institutions
• International trade opportunities
• Access to a diverse market
• No restrictions of employ visa given that space is provided for them. Can be further negotiated for remote workers who doesn’t require space.
Cons
• In case of any restrictions of the industry you have chosen, then the 100% ownership is not applicable, and you will have to share 51% with a local Emirati
• Risk of external intervention from the sponsor and interfere with the business operations
• There are no tax benefits like the freezones, the businesses will be subjected to both VAT and latest corporate tax which is going to be implemented.
• An office space which meets the requirement of DED is required get the business licence
• Depending on the business type approvals from different authorities may be required to start your business
• DED is the final authority and the setup process, capital required, sanctions all depend on the negotiations with the DED.
Freezone
Also known as special economic zones or free trade zones, these are locations that are designed to attract foreign investment with tax benefits and advanced facilities. The benefits of freezones are much more than these; they are curated as the ideal location for business setup in Freezone Dubai. Each freezone is monitored by a separate authority, which oversees the issuing of business licenses and activities in the freezone. The freezones are generally allocated to different fields, and currently there are over 25 free zones in Dubai. Free zones have their own benefits as well as disadvantages.
Some of the freezones in Dubai are
1. Meydan Freezone
2. Jabal Ali Freezone
3. DMCC
4. International Freezone Authority (IFZA)
5. Dubai design district
6. Dubai airport Freezone
7. Dubai internet city
8. Dubai studio city
9. Dubai world trade centre
10. International humanitarian city
As you can see each freezone has a field in which they focus on and if your business falls under any of these categories then it will be ideal to setup business there. Now let us take a closer look at the good and bad of the freezone.
Pros
• 100% ownership- Foreign individuals can have full ownership of business in freezones without the need of a local service agent
• Exemptions from tax- Freezone businesses can enjoy the tax benefits
• No need of physical office space to start a business in freezone
• Get assistance from authorities- The UAE government welcomes foreign investment with open hands and will help you out in the business setup process
• Ability to engage in multiple business activities under a single business licence in some freezones
Cons
• Business cannot be taken outside the jurisdiction of the freezone under which the business is registered
• Changing economic landscapes and financial laws which does have miniscule chance of affecting the business. Especially after the introduction of corporate tax in UAE
• Different authorities’ approval is needed to start business
• Freezones restrict the business activities that doesn’t fall under the freezone’s field of focus.
Mainland Vs Freezone
• DED is the monitoring authority in the mainland while in case of freezones the authority in charge changes according to the free zones
• Freezones can enjoy tax exemptions while the businesses in the mainland must pay VAT and corporate tax.
• 100% ownership is not fully applicable in Mainland, it is restricted to some businesses only. While in Freezone most businesses can have 100% ownership.
• Freezones doesn’t require a Local service agent
• Freezones don’t necessarily require office space to start a business, but Mainland requires a physical office addresses for issuing a business licence.
Whether it be freezone or mainland, you must decide which will suit your business best and fix on the location. Once the location is fixed, you can start setting up your business. With the help of an expert, you can reduce the time and resources needed by a significant amount. Alchemist Corporate Services is ready to assist you in your business setup with a team of experts who are knowledgeable and skilled in the field and have assisted the formation of many companies in Dubai. Reach out to us at +971556205750 and get a free consultation.
