Which is best for your business- Mainland or Free zone?
Scope of Business:
Mainland company: It can do business in the local market, any free zone as well as outside the UAE. It applies to all commercial or professional licenses.
Free zone company:
a) It can do business only inside a specific free zone or outside the UAE. It can not provide their services/ products to any UAE mainland.
b) The restriction of local business through a distributor is mainly to differentiate the business in the local market by mainland companies and free zone entities used for import/export. A distributor that has a Mainland license can act as your local agent and charge a certain fee which is lower than the 5% duty applicable on free zone invoices if they trade directly into the local market. In case the company chooses to use a distributor, the goods should be shipped in through the distributor itself if not, a 5% duty fee is applicable for any goods exiting the free zone.
c) Marketing of a free zone company can also be restricted as you are allowed to market your company only inside the free zone, whether it is face-to-face or even handing someone a business card.
a) A UAE National is mandatory in all mainland licenses either as a Local Sponsor or as a local service agent.
b) For Commercial License – Out of 100% of equity shares, 51% of shares must be held by Local Sponsor and a balance 49% share will be allotted to expatriate partners.
c) For Professional License – 100% of the equity share is allotted to expatriate partners and UAE nationals will act as a Local Service Agent.
Free zone company: Compared to a Mainland company, a free zone licensee 100% owned by expatriates. There is no need for a Local sponsor or Local service agent.
Mainland company: For every mainland license, there is a minimum requirement of 140 sqm office space. Department of Economic Development will release the license only after presenting the Ejari (Dubai) or Tawtheeq (Abu Dhabi).
Free zone company: Compared to the Mainland, a free zone company can be incorporated with/without the physical office. Free zone allows a license holder to use a smart/Flexi desk office usage however this restricts you on visa eligibility.
Mainland company: For mainland company, there are no limitations on the visa eligibility.
Ministry of Labour (MOL) will issue an Electronic Quota for every company and this can be increased by increasing the office space. Per 80 sqm of office space, you will be eligible for 1 visa.
If you are having staff for outside work like drivers, PRO’s and salespersons, you can apply for a separate quota for them and that will not affect your office space quota.
Free zone company: Free zone entities are limited to a certain number of visas and this normally varies from 1-6 visa packages.
If you require more than allotted visas, you might need to rent a physical space inside the free zone, this can be costly due to limited supply but high demand for commercial space.
Governing body approvals:
a) A mainland license must require standard approvals eg. Department of Economic Development, Dubai Municipality, Ministry of Labour, Ministry of Immigration.
b) Depending on the business activities, some companies may require third party governing approvals: Knowledge and Human Development Authority for all Education related activities, Dubai Health Authority (DHA) / Health Authority Abu Dhabi (HAAD) for all medical-related activities, Food Control Department of Municipality for all food-related license, Civil defence for all security-related business activities, Real Estate Regulation Authority (RERA) for all real estate regulated companies.
Free zone company: Freezone establishment is mainly for import & export of goods also, Freezone authorities usually do not need external authority approvals. However, any external approvals from governing bodies outside of your freezone, will not be entertained.
If you would like to do business only outside the UAE then Free zone is the best option for you but if you wish to do business across the world including UAE, then Mainland is the perfect option to establish your dream business in UAE.
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