It is imperative for aspiring entrepreneurs, interested in setting up a business within the UAE to familiarize themselves with the understanding of the differences between Mainland and Free Zone in the UAE.
This is important from the perspective of the advantages and disadvantages the two jurisdictions offer and the business opportunities provided to the entrepreneurs with different priorities. It will enable them to make a well-informed decision in as much as to the type of business unit, the companies’ line of business as to who to include as the trading partners and where to set up the Corporate Office. So what is the difference between Mainland Vs Free Zone will be the focus of this write-up.
The basic Difference Between the Two is as follows:
Onshore Company is another name for a Mainland in the UAE. The license for such companies is issued by the related emirates’ Department of Economic Development (DED). Such Mainland UAE companies are allowed to conduct business without any restrictions in the local domestic market and also outside the UAE.
Free Zone UAE
Whereas, Free Zone UAE are selected zones within the UAE, where the companies’ are incorporated and allowed to conduct their business within these designated jurisdictions of the Fee Zones. There are about, in excess of 40 free zones in the UAE at the moment. These Free Zones offer many incentives and benefits for the investors and also for facilitating set up of new business by them. One of the benefits is optimization in taxation like avoidance of dual taxation.
Now let us look in details what is the difference between Mainland Vs. Free Zone
- Business Scope – Those entities having Commercial or Professional licences, can conduct business without restrictions, in the local market, within any Free Zone and even outside the UAE.
- Business Ownership Pattern – It is mandatory to have a UAE National with a 51% Share Holding and the balance 49% shares can be held by an Expat business partner. But in case of a Professional License 100% Shares are to be held by the Expat Partner and the other (one) UAE National is to be appointed as the Local Service Agent only.
- Space for Office – The business entity should have at least 200 Sq. Ft. leased out office space (leased through an annual lease) in order to get a licence.
- Facilities for Visa – The Company is issued an electronic quota that indicates their eligibility for Visa and this can be increased with the increase in the manpower requirement from abroad.
- Approvals form the relevant Government Authorities – For the Licence as a Mainland, Standard approvals from different Government Authorities like DED, Dubai Municipality, Ministry of Labor (MIL), Ministry of Interior (MOI) etc., depending on the specific business needs, are required.
- Business Scope – For those entities engaged in international exports/ imports and would prefer to set up a base in the UAE for optimization of Tax, they can conduct their business within the same Free Zone or even outside the UAE.
- Business Ownership Pattern – The Expat Partner hold 100% Shares and a UAE National as a partner of Service Agent is not required.
- Space for Office – A company with a Free Zone License can be formed with or without a physical office and can use the business desk at the common business center for a minimum duration of weekly 5 hrs.
- Facilities for Visa – Almost all the Free Zone Licence provides for 2 Visas. With the smart office package, there are different Free Zones that permit 3 – 6 Visas. For any more number of visas, a physical office or a warehouse space will be required to be taken on lease.
- Approvals form the relevant Government Authorities – For issuance of Licence, there is no requirement for approvals from the external authorities like Dubai Municipality, Ministry of Labor (MIL), Ministry of Interior (MOI) etc.