Have you decided to launch your own business in the UAE but aren't sure whether to choose the Mainland or the Free Zone. A business can be established in any of the two jurisdictions, but before deciding which is better for your Business, a Mainland or a Freezone, you need to weigh a number of variables. The experts at Dhanguard advise creating a list of your requirements and preferences, including topics like the nature of your business, who will own it, whether you qualify for a visa, and your preferred office space.
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Investors from all over the world have a variety of objectives and preferences when it comes to launching a business in Dubai.
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Finding the best place to launch a firm that will appeal to investors is always important.
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One of the reasons why the UAE is recognised as a commercial hub is because there are so many different types of business opportunities available to people with different tastes.
Thus in today’s Blog, Dhanguard will help you in deciding which jurisdiction, whether mainland or a freezone, is best for your Business. So without any further ado, let’s learn!
Along with a wide array of services provided, Dhanguard also helps with Mainland, Offshore and Business Account opening as well.
Mainland & Freezone: What are they?
Mainland Company
Mainland Company is an inland company that can conduct business both inside and outside of the United Arab Emirates.
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Enterprises on the mainland have total freedom to operate when it comes to commercial and professional licenses.
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For the establishment of a mainland business in Dubai, a local sponsor or a national of the UAE is required.
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The normal shareholding structure for a Dubai mainland firm is that the UAE national Sponsor owns 51% of the business, while the Foreign Shareholder (s) owns 49%.
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The mainland corporation provides local sponsors and international investors with a tailored legal arrangement in which the local sponsor is compensated annually or with a portion of sales or profits.
Freezone Company
A freezone company is an independent legal entity that follows its own laws and guidelines. It is legal to conduct business in each free zone both inside and outside the UAE.
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The fundamental difference between mainland businesses and those operating in free zones is that mainland businesses can operate everywhere in the UAE whereas free zone businesses require the assistance of a local agent to operate in non freezones.
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There are numerous free zones in Dubai. Several factors influence why foreign investors pick free zone projects, including complete ownership rights, access to top-notch infrastructure, asset protection, and tax advantages.
What are the differences between a Mainland and Freezone Company?
Below mentioned is a thorough comparison between the Mainland and Freezone Jurisdiction so that you can make the best choice for your Business in the UAE-
Scope of Business
Mainland - Anywhere in the UAE market, a company that has its headquarters on the mainland of the UAE, is free to conduct business. This indicates that the organization is permitted to conduct business both inside and outside of the UAE.
Freezone - The company that is incorporated in one of the UAE freezones is subject to certain limitations. Companies operating in a freezone are permitted to conduct business both inside and outside the UAE.
Visa Eligibility
Mainland - UAE mainland companies are not subject to any restrictions regarding visa eligibility. The quantity of visas issued is based on the size of the workplace. In other words, if the business owner needs additional visas, they should create larger offices.
Freezone - Companies operating in free zones are subject to particular requirements regarding visa eligibility. Typically, between 1 and 6 visas are provided in every situation. The UAE visa packages differ depending on the freezone's legal system. More visas need to be issued, hence more workspace needs to be leased.
Read More: Get to Know about the Concept of Dual Trade License in UAE
Office Space
Mainland - For a UAE mainland corporation, a minimum requirement of 140 sq.ft in terms of physical office space is required.
Freezone - A Freezone firm does not necessarily need to have an actual office location. Without or with a location, a free zone firm can be formed. Virtual offices are permitted in the free zone for the United Arab Emirates.
Ownership of the Company
Mainland - The UAE government has permitted 100% foreign ownership for enterprises situated on the mainland of the UAE if a foreign investor establishes a commercial facility there. Previously, expat business owners were only permitted to hold a maximum of 49% of the company; the remaining 50% belonged to the Emirati sponsor.
Freezone - The foreign investor is the sole owner of the business. It is not necessary to transfer the shares to a local sponsor in the UAE. Therefore, the function of a local sponsor in this case is unnecessary.
Company Audit
Mainland - For a mainland UAE corporation, a financial audit is required.
Freezone - The method for preparing a financial audit for a free zone company differs depending on the freezone jurisdiction. The preparation of Audits is not required in several Free zone countries. A year end audit shall be prepared by some freezone entities, including FZE and FZCO.
Approvals regarding Business Setup
Mainland - The Department of Economic Development, Dubai Municipality, Ministry of Labor, and other government agencies are the agencies that mainland businesses must get approval from.
Freezone - All businesses created within the boundaries of a specific freezone must abide by a specific set of laws and restrictions. The establishment of a corporation in a freezone does not require clearance from external governmental bodies or organizations that are not part of the freezone.
Requirement of Capital
Mainland - A UAE mainland company's legal structure determines the required minimum capital.
Freezone - The Emirate in which the company is created decides what amount of capital is required for a freezone company.
Benefits of setting up your Business in Mainland or Freezone
Mainland
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Mainland businesses can conduct business with other Mainland businesses in Dubai or the UAE. Any region of the UAE or beyond is open to them for business. The fact that they are limited to operating in their designated free zone sets them apart from other free zone enterprises.
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Mainland enterprises have more alternatives for conducting business than free zone corporations do. In Dubai Media City, for instance, businesses must be engaged in the media or closely linked industries. However, there are no such limitations on enterprises operating on the mainland, allowing them to take advantage of the many opportunities provided by the larger UAE economy.
Freezone
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Complete foreign ownership is permitted, which is one of the most obvious advantages of establishing a free zone firm in the UAE. Thus, a UAE national sponsor is not required for the foreign investor's firm to be formed. Whatever the investor's nationality, foreign ownership is permitted.
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Government imposed limits on the exchange of foreign currencies are known as currency rules. The free zones of the United Arab Emirates have no monetary restrictions of any kind. Transactions involving money are facilitated by this.
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In the UAE's freezone jurisdictions, import and export taxes are not applied. International trade is aided by this.
Conclusion
We hope that this explanation of the key distinctions between Mainland and Free Zone Companies in the UAE has been helpful. At Dhanguard LCC, we help company owners and investors launch their visions on both UAE mainland and free zones. Contact our team of business advisers and consultants if you'd like more information about a mainland or freezone firm in the UAE and their specific business setup costs. All of your questions will be answered by us. For information on other related aspects, feel free to check out our Website as well.