Do you wish to form a company in Dubai? Are you confused between the mainland and freezone areas in Dubai? Read this blog to understand everything in detail.
Many prospective investors who want to start a business in the UAE ask, ‘What is the difference between mainland and free-zone companies?’ From the perspective of an investor, not having a clear and precise understanding of the various business jurisdictions in the UAE is akin to boarding a bus without knowing its route or final destination.
As a result, if you are interested in investing in the UAE, it is critical to understand the facts, basic rules, regulations, and differences between these jurisdictions. There are three types of business jurisdictions: Mainland, Free Zone, and Offshore. The investor or entrepreneur should consider these distinctions and choose the appropriate jurisdiction that best suits his or her business goals.
If you are having difficulty determining or comprehending the differences, please contact Vakilsearch’s team of expert business consultants and advisors right away.
Now, let’s learn more about the mainland company and free zone company in Dubai.
Company Formation in Dubai – An Overview
Dubai provides a plethora of hugely profitable opportunities for entrepreneurs and Indian investors taking an interest in exploring this market. You can choose between registering a free zone company in Dubai and applying for a mainland company in Dubai.
Additionally, companies of all sizes thrive in the UAE, enabling expats to follow their dreams in the region. After you arrive in Dubai, you should decide where you would like to launch your enterprise. One of the most important considerations when starting up a business in Dubai is selecting the appropriate type of company entity. In general, you have three options: mainland, free zone, or offshore organisation.
Each has advantages and disadvantages, with the correct choice based on your company’s economic activity, envisioned trade agreements, management structure, and other variables. So, how do the various business types compare? Which one is best for your company? Our blog delves deeply into these issues, comparing the costs, challenges, and benefits of each jurisdiction.
Free zone Companies
Free zones are markets in which products and services can be bought and sold with preferable tax and customs rates. You can benefit from 100% foreign ownership, 100% corporate tax dispensation, 100% repatriation and investment funds by operating in one of Dubai’s 30 free zones.
Visa Essentials
- The number of visas granted varies by free zone and is usually determined by the size of the office space leased. Typically, Dubai free zones will allow 3-6 visas.
- The number of visas that your company is eligible for at DMCC is determined by the size of the selected office:
- Up to three visas can be processed at the flexi-desk.
- Serviced office: 4 to 5 visas, depending on office size.
- There is one visa for every nine square metres of physical space.
- Office Essentials – Within each free zone, there are a variety of office space options available, ranging from virtual desks to offices and even flexi-desks.
- Ownership & Business Structure – One of the primary advantages of establishing a business in one of Dubai’s free zones is complete ownership of your company. A local sponsor or service agent is not required to start a business. You are not permitted to conduct business on the mainland as a free zone company. If the UAE is your target market, you will need to create a mainland corporation with a local financial backer.
Mainland Companies
Access to the local market and markets outside the UAE benefits mainland companies (also known as onshore companies). To register as a Mainland LLC company, you must first obtain a licence from the emirate’s Department of Economic Development (DED).
- Visa Essentials – A mainland company is not subject to visa restrictions. The number of residency visas issued is determined by the size of the leased office space or business facility. As a result, the larger the office space, the more residence visas your company may be eligible for. In general, one visa is issued for every 80 square feet.
- Office Essentials – Mainland companies, unlike free zones or offshore companies, must have office space. DED’s minimum office space requirement is to lease a minimum of 200 square feet. Virtual offices are not permitted for mainland businesses.
- Ownership & Business Structure – Ahead of the new UAE commercial entity ownership laws, international business owners who formed a mainland company in Dubai only could acquire 49 percent of the shares in the company, with the leftover 51 percent being procured by a local funder. However, as of December 1st, 2020, the UAE has passed a bill enabling 100 percent foreign ownership of mainland businesses. Because the settlement is so new, it has yet to be executed and explained properly. A company based on the mainland is free to conduct business throughout the UAE. They are also allowed to conduct business within any free zone in the emirates.
The Advantages of Starting a Business in the Mainland Dubai
- With a mainland company, you are completely exempt from corporate taxes. Furthermore, there is no requirement for a certain amount of capital. You only need to pay a statutory VAT of 5%, which is among the lowest in the world.
- You can enter the lucrative government sector by forming a mainland firm. Every year, the UAE government releases a variety of government consignments, which you can take advantage of through your mainland establishment.
- Foreign enterprises on the mainland are unaffected by UAE currency restrictions because they do not apply to them. Having a mainland business in Dubai also simplifies the visa application process. Furthermore, you can easily apply for multiple visas to ensure your family’s safe stay in Dubai.
The Advantages of Starting a Business on the Freezone Dubai
- A free zone company registration in Dubai allows anyone, whether an Indian business aspirant or a local investor, to own 100% of their business. Furthermore, for company formation in free zones, expats require the services of a local service agent. They help with paperwork and company registration but have no legal standing in the organisation.
- Because free zones have their own jurisdiction and cater to specific economic industries, your sensitive information is never made public. These distinct laws also provide additional corporate assistance in terms of resources, labour, and so on.
- Profits from a free zone company formation in Dubai can be repatriated in full. You also receive a complete exemption from personal income tax.
Conclusion
The location of your company is critical in determining its performance in the UAE. If you don’t pick the right one from the start, you’ll be saddled with extra costs for relocation, etc. As a result, it is preferable to get help from Vakilsearch, and our legal experts will handle everything for you. We cover all aspects of company formation, such as licensing, paperwork, banking, etc.
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