Mainland vs Free Zone: Which is Best for Your Business in Dubai?

Are you planning to set up a business in Dubai but unsure whether to choose a Mainland or Free Zone company? This guide will help you understand the key differences, benefits, and limitations of both options to help you make an informed decision.

Introduction

Dubai has established itself as one of the most attractive business hubs in the world, offering a dynamic economy and a supportive regulatory environment. One of the most important decisions entrepreneurs face when setting up a business in Dubai is whether to choose a Mainland company or a Free Zone company. Both options come with unique advantages and limitations, and the right choice depends on the nature and goals of your business. 

In this blog, we will break down the key factors that distinguish Mainland and Free Zone business setups, including:

- Ownership structure

- Business scope and activities

- Office space requirements

- Taxation

- Visa eligibility and employee restrictions

- Costs and fees

- The best consultancy for setting up your business in Dubai

 1. Ownership Structure

Mainland Company: 

In a Mainland company, foreign investors were historically required to have a local sponsor (UAE national) who holds 51% of the company shares. However, recent changes in UAE law now allow 100% foreign ownership in most sectors, making Mainland companies more attractive to international investors. This is especially beneficial for businesses wanting to operate both within the UAE and globally.

 A consulting firm that wants to provide services both in Dubai and other parts of the UAE will benefit from setting up as a Mainland company due to fewer operational restrictions.

• Free Zone Company: 

Free Zone companies allow 100% foreign ownership, which has always been a major attraction. However, Free Zone businesses are restricted to operating only within their respective Free Zone or outside the UAE unless they appoint a local distributor to conduct business in the UAE Mainland.

A digital marketing agency targeting international clients would thrive in a Free Zone, as it can retain full ownership and face fewer restrictions on its global activities.

2. Business Scope and Activities

• Mainland Company: 

Mainland companies can conduct business anywhere within the UAE and internationally. They have the flexibility to take on government projects and contracts, which Free Zone companies are not eligible for.

If your business involves trading, retail, or providing services to government entities, a Mainland setup will give you the flexibility to operate across the UAE.

• Free Zone Company: 

Free Zone companies are generally limited to operating within their designated zones or exporting internationally. While there are many Free Zones in Dubai, each specializes in specific industries like technology, media, or logistics, making them ideal for niche businesses.

A tech startup focusing on developing software solutions for international markets might find the Dubai Internet City Free Zone ideal for its needs, thanks to its focus on IT services.

3. Office Space Requirements

• Mainland Company: 

Mainland businesses must have a physical office space within the UAE to maintain their trade license. The size and location of the office space will vary depending on the nature of the business and the license requirements.

A retail store that operates on the mainland would need to lease or buy commercial space, which could vary in cost depending on the location (e.g., Sheikh Zayed Road vs. Deira).

• Free Zone Company: 

Free Zones often offer more flexible office space solutions, including virtual offices, serviced offices, and co-working spaces. This can be a more cost-effective option for startups or small businesses.

A freelance graphic designer setting up in the Dubai Media City Free Zone may opt for a co-working space, keeping overheads low while still maintaining the legal requirement for a registered office.

 4. Taxation

• Mainland Company: 

Mainland companies are subject to VAT (5% as of 2024) and, depending on the nature of the business, corporate taxes, especially if the company has international earnings exceeding AED 375,000. However, there are several tax benefits and exemptions available depending on the sector and activities.

• Free Zone Company: 

Most Free Zones offer tax exemptions, including no personal or corporate tax for a set period (usually 15-50 years) and no import/export duties. This makes Free Zones attractive for businesses whose primary revenue comes from international operations.

A logistics company in a Free Zone like Jebel Ali Free Zone would benefit from customs duty exemptions when importing goods for re-export.

5. Visa Eligibility and Employee Restrictions

• Mainland Company: 

Mainland companies have no specific limits on the number of visas they can issue, although the number depends on the size of the office space. Additionally, Mainland businesses can employ staff from both the UAE and abroad.

• Free Zone Company: 

Free Zones have specific visa quotas based on the type of office you choose. For instance, a virtual office may only allow one or two visas, while a larger physical office allows for more employees.

A Free Zone business might have difficulty scaling its operations quickly if its visa allowance is limited, while a Mainland business can hire more freely depending on its space and business requirements.

6. Costs and Fees

• Mainland Company: 

Setting up a Mainland business can be more expensive due to the need for physical office space and potential local sponsorship fees, although the recent foreign ownership laws have made this less of an issue. However, the ability to operate across the UAE and handle government projects can offset these costs.

• Free Zone Company: 

Free Zones generally offer more cost-effective packages for startups and small businesses. They offer simplified business setups with lower overhead costs, especially if you do not require a large office space. However, Free Zones often charge fees for renewing licenses and services like additional visas.

Final Thought: Which is Best for Your Business?

The choice between a Mainland and Free Zone setup largely depends on your business needs. If you require full ownership, lower costs, and operate internationally, a Free Zone setup is likely your best option. However, if your business requires flexibility to operate within the UAE, collaborate with government entities, or expand across the local market, the Mainland is the better choice.

In conclusion, Mainland and Free Zone setups both offer unique advantages. Consider your business activities, market reach, and future goals when making your decision. Always consult a business consultant in Dubai to ensure you make the best choice for your company’s growth.

Let's Get Started 

At Eurolink Visa Consultancy, we specialize in helping businesses establish themselves in Dubai and the UAE. Whether you’re setting up in the Mainland, Free Zone, or Offshore, we handle all aspects from licensing to visa processing and banking. With our in-depth knowledge of the region’s legal and business landscape, we make the entire process smooth and hassle-free, allowing you to focus on your business goals in Dubai’s thriving market.

For more information, visit official website :- https://eurolinkvisa.ae/business-setup-dubai-uae/