Mainland VS Free Zone 

Free Zone Company vs Dubai DED Mainland License

Posted at 14:02h in Business by Business Setup Consultants 0 Comments

I was recently speaking to a friend of mine about my job and how my company assists clients and he was surprised to find out that he could start a business in Dubai and it would be 100% owned by him. He was under the impression that you had to have a local Emirati sponsor who would have 51% ownership of your company no matter which business you choose to start and where you set up in the UAE. He did not know the difference between Free Zones and the DED Mainland. He did not realize that he could start his own business and have complete control of how the company is run.

Mainland VS Free Zone

The United Arab Emirates (UAE) has emerged as a global hub for business and entrepreneurship.  This dynamic landscape offers foreign investors a wealth of opportunities, but a crucial first step lies in selecting the optimal business structure. 

Mainland and Free Zone companies represent two distinct avenues for establishing a business presence in the UAE, each offering unique advantages and constraints. Mainland companies operate within the jurisdiction of the UAE government and are subject to the regulations set forth by the Department of Economic Development (DED) of the respective emirate. On the other hand, Free Zone entities operate within designated economic zones, benefiting from specialized incentives and regulatory frameworks tailored to promote foreign investment and entrepreneurship.

Deciding between establishing a presence in the UAE free zone or a mainland can significantly impact your company’s growth and long-term success. This guide delves into the distinct characteristics of Mainland and Free Zone companies, empowering you to make an informed decision tailored to your specific business goals.

Free Zone Company

A free zone license is going to give you 100% ownership of your company and give you complete control of your business. This is one of the biggest advantages and why many expats choose to set up in a freezone. 

There are 38 different free zones in the UAE and all of them offer different activities to choose from, different pricing, and different amenities. You may be allowed to obtain a certain license in one freezone whereas you wouldn’t be allowed to obtain the same license in another. 

For example, you can get a General Trading license in many different free zones, but you cannot in the Meydan Free Zone as they specialize in Consultancy licenses. Before you choose a particular free zone, it is best to consult with them first and determine if your activity would be allowed.

According to Free zone authority, Free Zone companies can also tend to be cheaper and be a quicker process to obtain whereas some of the quickest freezones in the UAE can process your license in just 2 working days.

Advantages of Dubai Free Zone Companies in UAE

Ownership Control: Free Zones eliminate the requirement for a local sponsor, allowing you to retain 100% foreign complete ownership and full decision-making authority over your company. This fosters agility and simplifies business operations.

Fast-Track to Business: Setting up a Free Zone company is a streamlined process compared to the mainland. With dedicated support teams and minimized bureaucratic hurdles, you can be operational in a shorter timeframe, allowing you to capitalize on market opportunities swiftly.

Tax Haven for Growth:  FreeZone companies typically enjoy significant tax benefits, often including exemptions from corporate and income taxes. This translates to increased profitability and enhanced cash flow, fueling your company’s growth trajectory.

World-Class Infrastructure and Support: Many Free Zones boast state-of-the-art infrastructure, including advanced logistics facilities, high-speed communication networks, and modern office spaces. Additionally, dedicated business support services within the FreeZone can assist with everything from legal matters to recruitment.

Industry-Specific Specialization:  Several Free Zones cater to specific industries, such as media or technology. These specialized zones offer tailored infrastructure, regulations, and networking opportunities that can significantly benefit your company’s growth within its chosen niche.

Dubai DED License

A DED Dubai (Department of Economic Development) Mainland license can also be beneficial because you would not limit yourself to one particular area. 

When you have this type of license, you are free to operate in any area of the UAE. While it is true that you would have to acquire a local Emirati sponsor who would have 51% ownership of your company, certain businesses work better with a DED Mainland license. For example, a Freight Forwarding company or a Catering company would be ideal in the DED Mainland so that you can offer your services anywhere in the UAE and not just in a particular zone.

When you have a free zone license, you are allowed to operate only within that free zone but if you had a DED Mainland license, you would not be restricted to one area.

The process for obtaining a Dubai DED Mainland license is quite different and a little more involved with more documentation needed to be signed. It can be a challenging process because not only do you have to sign these documents, but so does your local Emirati sponsor and you would have to coordinate schedules for availability.

Advantages of Dubai Mainland Companies in UAE

Market Access: Unlike Free Zones, which often restrict trade to specific regions or industries, Mainland Dubai companies enjoy unrestricted access to the entire UAE market. This includes the lucrative Dubai market, a global hub for trade and tourism. With a Dubai Mainland business, you can directly target both UAE national and international clientele, maximizing your customer reach.

Business Freedom: Mainland companies operate with greater flexibility in terms of permissible business activities. While some licensing restrictions may apply, the overall scope is significantly broader compared to FreeZones. This allows you to adapt your business model and expand into new ventures within the UAE as your company evolves.

Full Ownership on the Horizon: Recent policy updates in specific Emirates (information accurate as of March 15, 2024) are paving the way for 100% foreign ownership in certain mainland sectors. This shift grants you complete control over your company’s operations and future direction, fostering long-term stability and growth.

Building a Local Workforce: Mainland companies are empowered to sponsor visas for employees, allowing you to build a diverse and talented local workforce. This fosters stronger connections with the UAE market and facilitates seamless integration into the business ecosystem.

Difference Between Free Zone Company and Mainland 

Choosing the Right Structure: Dubai DED or Free Zone License

If you are not sure what is the best option for your business, DED or Free Zone company, it is always best to contact a Business Setup Consultancy to discuss your options. They can give advice on the best area for your proposed business activity and if a freezone is the most appropriate, they will advise you on which free zone will work best. Anytime you go into business with a partner, whether you know them or not, it is risky.

To make an informed choice, it’s crucial to consider several key factors that align with your specific business goals and requirements.

Target Market:

• Local Focus: If your primary target market is within the United Arab Emirates, a UAE Mainland company provides direct access to the entire market, including Dubai. This allows you to build stronger local connections and cater to both local and international clientele.
• International Focus: For businesses primarily targeting international markets, a FreeZone can be an attractive option. Many Free Zones offer world-class infrastructure and streamlined processes, making them ideal for import/export or global operations.

Business Activity Type:

• Broader Scope: Mainland companies offer greater flexibility in terms of permissible business activities. This allows you to adapt your business model and expand into new ventures within the UAE as your company evolves.
• Specific Industry Focus: If your business operates within a specific industry that thrives in a particular Free Zone (e.g., media in Dubai Media City), establishing a presence there can provide access to specialized resources and networking opportunities.

Ownership and Control Preferences:

• Full Control: Recent policy updates in specific Emirates (information accurate as of March 15, 2024) allow for 100% foreign ownership in certain mainland sectors. This grants you complete control over your company’s operations.
• Simpler Setup: Free Zone companies offer 100% foreign ownership for most business activities, making the setup process faster and easier.

Budgetary Constraints:

• Initial Investment: Setting up a Mainland company often involves higher initial costs for office space and licensing fees.
• Ongoing Costs: Free Zones may have higher ongoing costs for rent and maintenance within the zone. Additionally, depending on your market access needs, you might require a local distributor for mainland market access, incurring additional expenses.

I would encourage you to learn all you can about your partner and make sure that you can trust them and that they are reliable. Setting up a business in the UAE can be a challenging process no matter which jurisdiction you choose to set up in. It is best to go through a company that has experience in the process and that can get you your license with little hassle and in a time frame that works for you.

Consulting with Business Setup Consultants

Given the complexity and nuances of the UAE’s business landscape, it is highly recommended to seek the expert business setup service and guidance of experienced professionals like Business Setup Consultants. We have  the expertise to guide you through the process, considering your specific business goals, budget, and industry.

By leveraging their in-depth knowledge of the UAE market and the latest regulations, Business Setup Consultants can help you:

• Identify the most suitable jurisdiction based on your unique needs.
• Streamline the company registration and setup process.
• Secure the trade license and other necessary licenses and permits.
• Navigate visa sponsorship requirements.

So, if you are a UAE local or foreign investor, want to become a business owner in a free zone or mainland UAE. Don’t navigate this crucial decision alone.  Contact Business Setup Consultants today for a personalized consultation.

For a free consultation on which jurisdiction is better for you, DED or Free Zone, contact us today at info@businessetup.com .