Free Zone vs. Mainland: Which Business Setup is Right in Dubai?
Dubai has become a global business hub due to its strategic location and infrastructure. This city offers various options for setting up a business. You can hire reputable business set up consultants in Dubai to navigate the complexities of this process.
However, one thing you have to decide on your own is whether to establish your business in a Free Zone or on the Mainland. Both options offer distinct advantages and come with their regulations and restrictions. To find which one is better, we need to compare the two options. Let’s do so without any ado.
Free Zone Business Setup
Free Zones are special economic areas in Dubai that are designed to attract foreign investment. They provide tax benefits, full ownership rights, and streamlined regulatory procedures. Each Free Zone is controlled by its authority. Business hubs, tax benefits, trade flexibility, investment opportunities, global access, innovation, growth.
Mainland Business Setup
A Mainland business is registered under Dubai’s Department of Economic Development (DED). It means you can operate it anywhere in the UAE without restrictions. These businesses can freely trade within the UAE and engage in government contracts.
Free Zone vs. Mainland Business Set-Up
We will compare the two options based on different criteria such as market access, tax benefits, etc.
Ownership Structure
Free Zone investors get 100% foreign ownership without needing a local partner. However, business operations are restricted to the Free Zone or international markets only.
Foreign investors need a UAE national sponsor to set up business in Mainland. However, some businesses also allow 100% foreign ownership.
Market Access
Free Zone companies can operate freely within their designated zone and internationally. However, they cannot trade directly within the UAE without using a local distributor. They can also do so by opening a branch on the Mainland.
Mainland businesses have unrestricted access to the UAE market. They can freely trade with other businesses and customers within the country.
Licensing and Business Activities
Each Free Zone has its regulatory authority that issues licenses for specific industries. Businesses are often limited to certain activities based on the Free Zone they choose.
Mainland businesses can engage in a wide range of activities. They can apply for multiple business licenses under the same entity.
Office Space Requirements
Businesses in Free Zone can opt for a virtual office or flexi-desk solutions. They don’t need a dedicated office which makes it a more affordable option.
On the other hand, a Mainland business must have a physical office space. The minimum area of the office should be 200 sq. ft., as per instructions of the DEAD.
Tax Benefits
Dubai Free Zone company setup offers various tax benefits. You have to pay 0% corporate tax. Similarly, you will have no customs duties.
On the other side of the spectrum, Mainland businesses are subject to 9% corporate tax (on profits exceeding AED 375,000) and 5% VAT on goods and services. However, they can operate without restrictions, which offsets tax liabilities.
Both Free Zone and Mainland setups in Dubai offer unique advantages. The right choice depends on your business goals, industry, and market reach.
