The difference between mainland and freezone companies ?”
August 15, 2022
mainland and freezone companies is a common inquiry by many prospective investors who are planning to start a business in the UAE market. From an investor’s perspective, not having a clear and precise understanding of the different business jurisdictions in the UAE is almost equal to boarding a bus without the knowledge of its route or final destination.
UAE Mainland vs. Free zone Company
The 3 different types – Mainland, Freezone and Offshore have evident differences with respect to several criteria. This article describes the major differences between Mainland and Free zone jurisdictions with respect to parameters like Ownership and scope of Business, Office space, visa eligibility, Company audit, and others.
Mainland company – A mainland company is nothing but an onshore company which is registered under the government authority of the concerned Emirate. The trade license is issued by the Department of Economic Development of the particular Emirate. A UAE mainland company is mainly characterized by the restriction-less trading opportunity. When an investor invests in a mainland company in the UAE, the company is authorized to trade in the UAE local market as well as outside UAE.
Freezone company– A free zone company is a company formed within a special jurisdiction that comes under a particular Emirate. As of now, over 40 Free Zones operating in the UAE as a whole. Free zone jurisdictions have their own regulations and have a government regulatory body called the Free Zone Authority. Freezone authority is in charge of trade license issuance. A UAE free zone is characterized by the benefits of 100% foreign ownership and tax concessions. A free zone company is authorised to trade only within the free zone and outside the UAE.
Now let us move on to the major differences between a Mainland and free zone company in UAE. These differences are arranged in tables for the benefit of the reader. Kindly go through the same.
Ownership of Business
Mainland Company v/s Free Zone Company
If a foreign investor forms a business establishment in the UAE mainland, The UAE government has allowed for 100% foreign ownership for the businesses located on the mainland. Earlier, the expat business owners were only allowed to own a maximum of 49% ownership of their business while the remaining 50% share belonged to the Emirati sponsor. The foreign investor enjoys complete ownership of the company. Assigning the shares to a UAE local sponsor is not required. Therefore, the role of a local sponsor is irrelevant here.
Scope of business
Mainland Company v/s Free Zone Company
A business concern incorporated in the UAE mainland is free to do business anywhere in the UAE market. This means that the company is allowed to do business both inside and outside the UAE.There are certain restrictions on the company incorporated in any of the UAE free zones. Free zone companies are allowed to do business within the jurisdiction of the particular free zone and outside UAE.
Office space
Mainland Company v/s Free Zone Company
When it comes to physical office space, a minimum office space requirement of 140 sq.ft is obligatory for a UAE mainland company. A physical office space requirement is not obligatory for a Free zone company. Free zone company formation is possible with or without premises. In the case of the UAE free zone, virtual offices are allowed.
Visa Eligibility
Mainland Company v/s Free Zone Company
UAE mainland companies do not have any kind of restrictions connected with visa eligibility. The area of the workspace determines the number of visas issued. This means that, if the owner of the company requires more visas, he/she should have bigger work premises. Free zone companies have certain restrictions connected with visa eligibility. In ordinary cases, the number of visas issued ranges from 1 to 6. The visa package vary with the free zone jurisdiction. Issuance of more visas demands leasing out additional work premises.
Company Audit
Mainland Company v/s Free Zone Company
A Financial Audit is mandatory for a UAE mainland company.Preparing a Financial audit for a free zone company varies with the Free zone jurisdiction. Certain Free zone jurisdictions are exempted from Audit preparation. Certain Free zone entities like FZE and FZCO should prepare a year-end audit.
Capital prerequisite
Mainland Company v/s Free Zone Company
The minimum capital prerequisite of a UAE mainland company is determined by its legal structure. The minimum capital prerequisite of a free zone company is determined by the Emirate in which the company is formed.
Approvals related to business setup
Mainland Company v/s Free Zone Company
The mainland companies need to seek approvals from various government bodies like the Department of Economic Development, Dubai Municipality, Ministry of Labour etc. Each free zone has a set of rules and regulations applicable to all the companies that are formed within the jurisdiction of the particular free zone. External approvals from government bodies and agencies that do not belong to the free zone are not needed for the free zone company setup.
For registration and compliance in the Dubai and all over UAE, also for the Export Payments. Feel free to contact:
Manjeet Singh
+91-8700237256
[email protected]
