One of the most desired places in the world to start a business, Dubai is amongst the top business hubs to embark on an entrepreneurial ride. However, when it comes to choosing the right region to set up a business in Dubai, it becomes a big challenge for investors. Here, we will try to find out the difference between the mainland and a free zone company to help you understand which form of business is ideal and more beneficial for you.
Mainland Company in Dubai
Mainland companies in Dubai are licensed by the Department of Economic Development (DED) of the emirate that allows them to run business in the local market as well as outside the country with zero restrictions.
Free Zone Company in Dubai
Free Zone companies in Dubai can operate within a particular jurisdiction of the emirate; where the company is allowed to run a business either inside the same free zone or outside UAE. However, when a company is engaged in the trading of physical goods on commercial licenses, the company will not be allowed to run local business directly as the government has specified restrictions to trade in the local market through a distributor and by paying 5% duty on the local market bills.
Differences Between Free Zone and Mainland Dubai
Scope of Business
Business setup in Dubai mainland will enable you to conduct business in the local market, in any of your chosen free zones in Dubai, or even outside UAE. And this is for all professional or commercial licenses.
On the other side, a free zone company in Dubai can do business in the same free zone in which they are registered or even outside the country. This option is very suitable for any business person who wants to set up a base in the country for their imports and/or re-exports with the international market.
The limitation that distributors have in the local business is aimed at distinguishing the company in the local market by free zone, and mainland company licenses applicable for both imports and exports. By accessing a mainland license, the distributor can become your agent and enforce a certain charge, that would be lower than the 5% duty, which can be used on free zone invoices in conditions where they trade into the local market directly.
Structure of Ownership
If you want to establish a business in Dubai mainland, you must know that the presence of a local is necessary either as a service agent or a partner.
In a commercial license, except that:
● 49% shares go to the ex-pat partner, and
● 51% of shares are held by a local.
However, in a professional license, the shares are completely held by the expatriate partner. And one local partner appointed as a service agent.
But, free zone license is fully held by the expatriate partner and a local partner/service agent is not needed.
Visa
If you have opted for a business setup in Dubai mainland, then there is no visa limitation on the license. Every company gets an electronic quota, known as E-quota from the Ministry of Labor. From there, companies can get an idea about their visa’s eligibility, which can be further increased if the company needs more staff.
However, if you have opted for a free zone company in Dubai, you are eligible for 2 visas on the smart office package. But, some free zones in Dubai allow 3 to 6 visas.
Above are some of the significant differences between a mainland company and free zone company in Dubai, UAE. Each business is different, so each one would have its own specific requirement, hence to think what fits one would fit all would be wrong. You should opt for your type of business zone based on your business need. It would be great if, you, seek help from a professional business setup consultant in Dubai that will help you in the entire process.