Mainland or Free Zone: Which is best for your business?

Dubai has become synonymous with business and entrepreneurship. As a city known for its rapid development and business-friendly environment, Dubai offers various options for setting up a company in Dubai. The two main choices for entrepreneurs are Dubai Mainland and  Dubai Free Zones. 

Dubai Mainland is an economic zone monitored by the Department of Economic Development (DED). Setting up a business in the Dubai mainland allows for greater flexibility in terms of business activities and the ability to trade within the local market. On the other hand, Dubai Free Zones are specialized economic zones that cater to specific industries such as technology, media, finance, and logistics. It offers a range of benefits to businesses, including 100% foreign ownership, tax exemptions, and custom-duty privileges. 

Let’s understand the key differences between free zone vs mainland Dubai, the advantages and disadvantages of each option, and which one is right for you. 

Free Zone vs. Mainland: Explained

1. Dubai Free Zone 

Dubai Free Zones are designated areas within the Emirate of Dubai that offer a variety of benefits and incentives to attract foreign investment and businesses. These zones are typically self-contained communities with their own infrastructure, regulations, and business environment. 

1. International Free Zone Authority (IFZA): IFZA is a leading Free Zone Community in Dubai with top-tier infrastructure, cutting-edge amenities, and regulatory frameworks conducive to business. The Freezone offers the ideal destination for foreign investors looking to set up and grow their businesses.
2. Jebel Ali Free Zone (JAFZA): The largest free zone in Dubai, JAFZA is a multi-purpose zone that caters to a wide range of industries, including manufacturing, logistics, and trading.
3. Dubai International Financial Centre (DIFC): A leading financial center in the Middle East, DIFC offers a wide range of financial services, including banking, insurance, and asset management.
4. Dubai Internet City (DIC): A hub for technology and media companies, DIC offers a range of services, including data centers, co-working spaces, and business support.
5. Dubai Media City (DMC): A one-stop shop for media and entertainment companies, DMC offers a range of facilities and services, including studios, production facilities, and post-production services.

Key features of the Dubai Free Zone

• 100% foreign ownership. Businesses can be fully owned by foreign investors. 
• Companies operating in free zones are exempt from several taxes for a specified period. 
• There are no restrictions on the movement of capital or profits. 
• The process of setting up a business in a free zone is relatively quick and easy. 
• Free zones offer state-of-the-art facilities and services. 
• Dubai is a major transportation hub, located at the crossroads of Europe, Asia, and Africa. 

Benefits of Setting up a Business in a Dubai Free Zone

1. Tax benefits 

2. Ease of doing business 

3. Access to new markets 

4. World-class infrastructure 

5. Supportive government 

6. Cost-Effective Options 

How to Setup a Company in Dubai Freezone?

1. Research and select the zone suited to your business activity and needs. Ensure your desired activity is permitted in the chosen zone. 
2. Certain activities may require specific approvals from relevant authorities. 
3. Submit required documents and fees to the Free Zone Authority. 
4. Upon approval, receive your business license. 
5. Open a dedicated account for your company operations. 
6. Apply for visas and residence permits for employees (if applicable). 
7. Activate your license, set up your office, and commence operations. 

Limitations of Operating in Dubai Free Zones 

• Depending on the license type and free zone, trading within the UAE mainland might be restricted or require additional licenses. 
• Hiring UAE nationals directly might be restricted or require special approvals. 
• Each free zone has its own regulations and compliance requirements. 
• Each free zone has a specific list of permitted activities. Businesses operating outside their designated activity may face penalties or restrictions. 

2. Dubai Mainland 

Setting up a business in the Dubai Mainland refers to establishing a company within the geographical area directly governed by the Emirati government, outside of any designated free zones. This setup offers several advantages and caters to a wider range of business activities compared to free zones. 

Unlike Free Zones with specific regulations and limitations, mainland companies enjoy wider operational freedom and greater market access. 

Key Features of Dubai Mainland 

1. Full Business Ownership 

2. Wide range of business activities 

3. Direct access to the UAE market 

4. Greater flexibility 

5. Government Contracts 

Types of Business Structures 

1. Limited Liability Company (LLC): Most popular option, offering limited liability for owners and various shareholding structures.
2. Sole Proprietorship: One individual owns and operates the business, with unlimited liability.
3. Branch of a Foreign Company: Existing foreign companies can establish a branch office in Dubai mainland.
4. Civil Company: Two or more UAE nationals can form a company for professional activities.

Compared to free zones, mainland company formation in Dubai typically involves higher initial costs for licenses, visas, and office space. Mainland companies are subject to corporate income tax after a certain limit. 

As of now, there is 0% for taxable income up to AED 375,000 (approximately $102,200). This means small businesses with profits below this threshold are exempt from corporate tax. 9% for taxable income above AED 375,000. This applies to most mainland companies in Dubai. 

How to Setup a Company in Dubai Mainland?

• Choose your business activity from the DED (Department of Economic Development) list and opt for a legal structure. 
• Submit desired names to DED for approval. 
• Submit application, documents, and fees to DED. 
• Secure office space and obtain an attested lease agreement. 
• Submit all requirements and pay the final fees to receive your trade license. 
• Open a dedicated business bank account. 
• Apply for visas and residence permits for employees. 

Which One is Right for You? Dubai Free Zone Vs Mainland 

Choosing between a Dubai Free Zone and the Mainland for your business depends on several factors, and there's no one-size-fits-all answer. It's always a good idea to get an expert consultation from a leading business setup consultant in Dubai such as Shuraa India.  

1. Target Market

2. Business Activity

3. Ownership

4. Budget

5. Operational Flexibility

Choose the Right Path with Expert Guidance

Deciding between Dubai Free Zone and Mainland for your business depends on your specific needs and goals. Both options have their own advantages and disadvantages, so it's important to carefully consider your priorities before making a decision.  

Seeking professional advice from experts like Shuraa India can be incredibly valuable during this process. We have the knowledge and experience to guide you in the right direction to ensure that you make an informed choice that aligns with your business objectives.  

With our comprehensive services, from company registration and licensing to PRO services and visa assistance, we'll assist you at every step of the way. Contact Shuraa India today!