Mainland vs Freezone: Advantages and Drawbacks of Establishing a Business

Dubai offers aspiring entrepreneurs two distinct business setups: Mainland and free zone. Understanding the advantages, drawbacks, and requirements for mainland vs free zone licenses is crucial for making an informed decision.

Whether you just moved to Dubai to establish your business or you’re just not familiar with the legal requirements, this guide below will help you get a Dubai business license suitable to your needs.

Mainland

Advantages

• Full access to the UAE market
  Acquiring a Dubai mainland license will allow you to operate anywhere in the country, reach a wider customer base, and participate in government tenders.
• No limitations on business activities
  A mainland license will allow you to engage in any legal business activity except those restricted to specific sectors.
• 100% foreign ownership
  Effective August 2021, investors acquiring licenses to operate specific activities in Mainland Dubai are no longer required to have local partners.
• Greater flexibility in hiring
  Having a business on the mainland makes it possible for foreign investors to hire both local and international employees without quotas.

Drawbacks

• Higher setup costs
  One of the drawbacks of Free Zone vs Mainland in Dubai business set-up is that the latter requires licensing, registration fees, and potentially renting physical office space.
• Corporate taxes
  Subject to 15% corporate tax on net profits.
• Visa restrictions:
  Visa fees and limitations apply depending on employee nationality and company size.

Licensing

The Department of Economic Development (DED) issues licenses for Mainland companies.
Specific licenses may be required depending on the business activity.
Fees vary based on license type, company size, and location.

Freezone

Advantages

• Tax benefits
  Freezone companies typically enjoy 0% corporate and personal income tax.
• 100% foreign ownership
  New regulations made it possible for foreign investors to operate businesses in the free zones with no local partners required.
• Simplified setup process
  Faster and less bureaucratic setup process for mainland vs freezone licenses UAE.
• Repatriation of capital and profits
  Foreign investors can freely repatriate all profits and capital.

Drawbacks

• Limited business scope
  Unlike businesses established in the Mainland, activities are restricted to the specific free zone regulations.
• Limited market access
  Entrepreneurs who establish businesses in free zones cannot directly trade with the UAE mainland without additional licensing and fees.
• Visa restrictions
  Compared to those who conduct business or work in the mainland, obtaining visas for employees in free zones can be more complex and expensive.

Licensing

Each free zone has the authority to issue licenses specific to the activities allowed within the zone. Costs and procedures vary depending on the free zone and chosen activity.

When it comes to choosing the ideal hub for your investment, consider your business goals, target market, budget, and operational needs. If you require full market access and flexibility, the mainland might be ideal. A free zone could be suitable if tax benefits and a streamlined setup are priorities,

If you’re not familiar with the legal requirements and processes, consulting with business advisors like Austria Business Center can help you navigate the intricacies of each option and make the best choice for your specific entrepreneurial journey.