Are you setting up a company in Dubai? Choose the appropriate jurisdiction for your business conduct in Dubai, which is one of the most critical tasks. You must choose between setting up a company in the free zone or the mainland of Dubai. You must understand the fundamental difference between these jurisdictions to make an informed decision because it is a significant decision.

Prospr is releasing a comprehensive guide today that helps you pick the best jurisdiction for your business.

What is a Mainland company?

The Dubai Mainland economic zone is overseen and managed by the Department of Economic Development (DED), a government agency. A legal entity that is registered with DED is a mainland company. This company is free to conduct a broad range of business activities and has access to over 2000 business opportunities throughout the United Arab Emirates.

A Mainland company is allowed to conduct business with other companies in the United Arab Emirates and abroad. Bidding on government contracts is another benefit of setting up a mainland company in Dubai.

Foreigners used to need an Emirati national as a local sponsor who held a 51 percent stake in the company if they wanted to set up a company on the mainland. As a result, foreigners now own 49% of their business.

Under the new legislation, foreigners can now possess 100% of mainland companies if they conduct specific business activities. The following is a list of all the business activities that permit foreign nationals to maintain complete ownership of their companies.

What is a Freezone company?

Dubai's Special economic zones, free zones, open doors for several local enterprises. A non-governmental organization called the Free Zone Authority (FZA), or an independent government body, oversees a free zone. Every free zone adheres to the rules and restrictions set by its unique FZA. A free zone company is a legally recognized organization registered inside an emirate's designated autonomous territory.

Each free zone provides unique packages and incentives to entice investors and businesses. The primary motivation for many companies to set up shop in free zones is the provision of 100% foreign ownership and a free zone environment. These two advantages make the free zone an ideal jurisdiction for a company to shop in Dubai.

There are now around 40 free zones in the United Arab Emirates. You should be aware that a company operating in a free zone can conduct business both domestically and abroad. It means you won't be allowed to conduct business on the UAE mainland if you set up in a free company zone.

Three different kinds of companies can be set up with a free zone.

·       Establishment of Free Zone (FZE)

·       Free Zone Company (FZC)

·       A Division of an Already-Operating Business

No matter what kind of company formation you need in a free zone, Prospr's free zone expert will assist you in successful formation in Dubai.

What's the difference between a free zone and the mainland?

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**Point of difference **

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Dubai Free zone company

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Dubai Mainland company

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Authority

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Free Zone Authority -FZA

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The Department of Economic Development (DED)

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Office

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Can have either a physical or virtual office depending on business operation.

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Must have physical office location registered with Ejari and need approvals

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Ownership

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100% foreign ownership.

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51% local sponsor ownership, and 49% foreign ownership; 100% ownership for some business activities

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Scope of Business

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Do business within freezone and internationally; not permitted to do business in the UAE mainland

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Do business all over UAE and internationally; no area restriction

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Control on Business

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Jurisdiction is controlled by private entities that may change the rules and regulation of freezone anytime.

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government bodies control Mainland companies. Your company needs to follow the contractual terms.

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Tax

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Exempt from corporate tax, no income tax

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9% corporate tax on profits exceeding AED 375,000, if annual turnover is 1 million

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VAT

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Generally, 5% but many free zones have 0%

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5%

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Import/export duties

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Exempt from import/export duties

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Custom duties are applicable

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Cost

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The cost of free zone company setup in Dubai depends on business size and nature. Cost varies from one free zone to another. Company formation cost usually increase in a freezone where you need to fulfill minimum capital requirements.

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Factors affecting the cost of mainland companies’ setup are business type, number of shareholders and rental space.

Minimum cost to start mainland company in Dubai is AED 260,000

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Visa

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Limited visa

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Issue unlimited visa depending on office location

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Annual audit

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Depends on free zone

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Obligatory

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Cost -effectiveness

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Setting up a free zone company is an expensive option as you need to restrict business activities only within the freezone.

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Setting up a company in Dubai mainland is a cost-effective option since it allows you to do business anywhere in the UAE. SME and budging entrepreneurs can make the most of Mainland company formation in Dubai.

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How to choose between Freezone and Mainland?

The difference between Dubai's mainland and free zone companies is finally clear to you. Choose a jurisdiction that looks appropriate for your UAE business at this point. You need to take these crucial elements into account.

Commercial operations

While there are over 2000 business activities on the mainland, you may only conduct a limited amount of business in free zones. For your business activities, you need to know which jurisdiction is best. You can view a list of activities in to find the answer to your query. Book a consultation with Prospr's business consultant as an additional smart move. For your business, we can help you find the best zone.

Customer Base

Your free zone customers are another consideration that helps you choose between the mainland

and free zone companies. What kind of customers do you intend to pursue? You need a Mainland company licence if your business strategy covers the entire United Arab Emirates. You can set up a company in the Dubai Free Zone, regardless of whether your customers are based abroad or in a particular free zone.

If you intend to set up several retail locations in the United Arab Emirates, for instance, you need to choose Mainland company formation. However, if you are setting up an international e-commerce store, choose a quick and simple business setup in a free zone.

Visa numbers

If it expands its site, a mainland company will be able to handle the number of visas it can issue. You must pay AED 3,000 for each employee visa if you own this company. An employee visa costs less in the mainland than in free zones.

With a free zone company visa, each license may only issue up to six visas. You should set up a company in Dubai Mainland when your business is labor-intensive and needs more people. However, a free zone company is an excellent choice if you are comfortable having six employees.

Tax

Tax is a crucial factor to consider. If your Mainland company's annual revenue exceeds AED 1 million, you must only pay a 9% Corporate Tax on profits above AED 375,000 annually. For those who wish to avoid paying corporate tax, freezone companies are a great option. Companies in the freezone and on the mainland pay 5% VAT, while some companies in the freezone pay 0%.

How can Prospr assist you in choosing between Mainland and Free Zone Company Formation?

Our business consultants in Dubai have years of expertise in recognizing the demands and specifications of various businesses because every business is distinct. We assist with company setup in both free zone and mainland regions. We can even help you in setting up an offshore company in Dubai.

Picking the appropriate jurisdiction for your company setup is tricky. Therefore, we are here to assist you in making the best decision possible. Schedule a consultation right now.