Freezone vs. Mainland Company in Dubai – Differences & Costs

In the Company formation in Dubai This raises the question for many as to whether a Mainland Company (LLC) or a Freezone Company (FZCO) makes more sense. Below are the key differences, advantages, and disadvantages of each legal form, as well as frequently asked questions.

In advance, it can be said that this decision should be well considered to avoid unnecessary costs and to operate legally and economically.

What is a mainland company?

A mainland company is an onshore company registered with the Department of Economic Development that can conduct business both within and outside the UAE.

The trade licenses for mainland companies are issued by the Department of Economic Development (DED), and their business activities are subject to few to no restrictions, which is considered the main characteristic of mainland companies. However, some business activities require a local sponsor or a UAE national as a partner in the company.

What is a Freezone company?

A company in a Freezone is a company registered in a Freezone, which is an autonomous judicial district within each emirate. The Freezone Authority (FZA) is the regulatory body that operates Freezones and governs their functions. Currently, there are over 45 Freezones nationwide, offering 100%iges ownership and many other unique features.

Differences at a glance

Companies in Freezones and on the mainland offer business owners a wide range of benefits and features. For example, companies in a Freezone offer foreign investors the advantage of being 100% owned by them, being exempt from taxes, and enjoying greater operational freedom within the Freezone. Companies on the mainland, on the other hand, offer better access to the UAE and the global market, as well as the ability to conduct business throughout the country without restrictions.

Here are the main differences between the two companies:

• Ownership status: In Freezones, entrepreneurs own 100 % of their companies without needing a local sponsor. For companies on the mainland, foreign investors must have an Emirati partner who holds at least 51 % of the company’s shares in order to conduct most business activities. This primarily applies to infrastructure and utilities, such as hospitals, telecommunications, and energy supply. However, most activities are now completely open to expats and, as of 2021, no longer require a local sponsor.
• Location Companies in Freezones are based in the designated Freezones of the UAE, while mainland companies can be located anywhere in the country.
  Workspace: Mainland companies must have an office with a minimum area of 20 square meters to obtain a license. However, companies in Freezones do not need to provide a physical location, and many Freezones allow companies to operate from virtual workspaces.
  Scope of Business Operations: Companies in Freezones are restricted in their business operations within the UAE market as they are not permitted to trade directly with the UAE market, but only through locally appointed distributors. Companies in mainland, on the other hand, are exempt from this restriction and are allowed to conduct business anywhere within the UAE.
• Permits Mainland companies require permits from various government agencies, including the Ministry of Economic Development, municipalities, the Ministry of Labor, and others. Freezones have their own jurisdiction and their own regulations for company establishment, and you do not need permits from government agencies outside the Freezone to establish your company.
• Visa For companies on the mainland, there are no visa restrictions. However, the number of visas issued depends on the size of the company's workspace; the larger the workspace, the more visas can be granted.

  While there are restrictions on the number of visas that can be applied for by companies in Freezones, this depends on the Freezone's regulations and other conditions.

• Capital requirement The legal structure of a mainland company determines its capital requirements, while requirements in a Freezone are determined by the emirate in which the company is established.

Advantages of both legal forms

As an entrepreneur looking to establish a business in the UAE, you need to be well-informed about the advantages of both company structures to make the right decision. Below are the advantages of both companies.

Advantages Mainland

Here are the most important points in favour of a mainland company formation in Dubai.

• No restrictions on doing business in the UAE.
• 100%ige Repatriation of profits and capital in most business activities.
• No restrictions on the number of visas.
• Unrestricted access to local and global markets.
• More business activities compared to companies in a Freezone.
• Easy access to a business bank account.

Advantages of a Freezone

Below is an overview of the main advantages of Freezone Company in Dubai.

• 100 % foreign ownership without the need for a local sponsor.
• Simple and fast company formation.
• 100%ige Repatriation of Capital and Profits
• Lighter employment policy.
• Advanced infrastructure and job opportunities.
• Low setup costs

Frequently asked questions

The most frequently asked questions for deciding between a mainland and Freezone company at a glance.

Summary

Whether to establish a Mainland or Freezone company depends heavily on the business's purpose, meaning its activity. Mainland LLCs offer many licenses and allow for the sale of physical products in the UAE. However, for those primarily operating internationally, a Freezone FZCO is usually better.

If you are still unsure which company structure is right for you, feel free to contact us at any time and we will help you with a no-obligation initial consultation.