Mainland vs Free Zone Company Formation In UAE

Mainland vs Free Zone UAE. Which one is ideal? Opting for the right jurisdiction is crucial for entrepreneurs wanting to operate domestically or internationally. While Mainland business formation offers direct access to the UAE market and unrestricted business activities, Free Zone firms get 100% foreign ownership and significant tax incentives. 

Thus, understanding the key differences is essential to determine the business activities, set up cost, market access, and regulatory compliance. Have a read of this blog, compare and choose what is best suited for your business in the competitive landscape of the United Arab Emirates. 

Mainland Vs Free Zone UAE: The Overview

Mainland company formation is a process of establishing an onshore company in the UAE. These entities are legally licensed by the Department of Economic Development (DED) and can operate anywhere in the Emirate.

The mainland company formation allows businesses to operate in a wide spectrum of business activities with 100% foreign ownership in several notable designated areas. 

Free Zone company formation is also a procedure of establishing a company, but within the Free Zone designated areas. The firms that operate in those areas acquire their trade license from the specific Free Zone governing local authorities. This type of company formation allows foreign businesses to keep 100% of their firm with other benefits in every Free Zone area. 

Comparison Between Mainland and Free Zone Company Formation

1. Operational Reach

Mainland: Mainland companies can operate anywhere in the UAE with international market reach. 

Free Zone: Free Zone companies operate mainly within the Free Zone area and internationally. 

2. Ownership Scope

The ownership scope of the mainland vs Free Zone UAE is competitive; here is a breakdown: 

Mainland: 100% ownership allowed in specific areas of business, including: 

• Trading and Manufacturing
• Technology and Electronics
• Services such as IT, AI, Tourism and Hospitality
• Agricultural, Resources, and more

Free Zone: You can operate in nearly all the economic sectors through a Free Zone company formation. It includes: 

• Trading and E-commerce
• Consulting and Services
• Industrial and Manufacturing
• Technology and Digital Sectors
• Healthcare, Education, Media, Creative, and more. 

3. Market Access

Mainland: In the mainland vs Free Zone UAE, mainland company formation allows direct trade with the UAE market.

Free Zone: The Free Zone companies require a licensed sponsor or local distributor. 

4. Licensing Authority

Mainland: For mainland company formation, you have the Department of Economic Development (DED). 

Free Zone: In Free Zone, you can choose any Free Zone authority depending on the area you are operating within. Some of the key governing Free Zone licensing authorities include: 

• International Free Zone Authority (IFZA): Ideal for new business setups. 
• Meydan Free Zone (MFZ): Best for companies offering digital solutions. 
• Ras Al Khaimah Economic Zone (RAKEZ): Serves many industrial and commercial business activities. 
• Jebel Ali Free Zone (JAFZA): Best choice for logistics and trading. 
• Sharjah Media City Free Zone (SHAMS): Caters to media and creative businesses. 

5. Workspace Solutions

Mainland: A physical office space is mandatory to perform any kind of business activity in the UAE. 

Free Zone: Here, you are offered flexible office solutions, from physical to flexi-desk, virtual, and shared offices. 

6. Visa Features

Mainland: For mainland company formation, there is no limit to the visa sponsorship. You can obtain multiple visas, one for yourself, for shareholders and partners, employees, friends, and family members. 

Free Zone: In the Free Zone company formation, UAE, Arabian Wingz, the visa quota is dependent on the license type and the office space. 

7. Estimated Cost of Set Up

Mainland: The cost of company formation in the mainland areas is generally higher due to workspace rentals, licenses, permits, and approvals. The normal cost for a license starts from AED 15,000. 

Free Zone: The basic packages of company formation in the Free Zones start from AED 10,000 to AED 35,000, depending on the zone area, and are more cost-effective than a mainland company formation. 

8. Corporate Bank Account Opening

Mainland: For firms operating in the mainland, the bank account opening for them is often easy and quick. 

Free Zone: Opening a bank account in the Free Zone is also simple, but it can take time due to the Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations of the banks. 

9. Number of Business Activities

Mainland: The mainland company formation allows the operation of over 1,000 business activities. 

Free Zone: In the Free Zone company formation, UAE, Arabian Wingz, you are allowed over 1,500 business activities across all the Free Zones. 

10. Taxes and Custom Duties

Mainland: The mainland companies are subject to pay 5% import duties and 5% VAT to the UAE government. The rate of corporate tax is 9% on profits exceeding AED 3,75,000 of profits. 

Free Zone: Free Zone companies are also subject to pay 5% of VAT, but zero percent custom duties. In addition, they are also free from corporate taxes under the qualifying income regulations. 

Note: Even if the tax is 0%, the companies are required to register for corporate tax and file annual returns. 

11. Duration of Setup

Mainland: Considering every procedure, including licensing, registration, and bank account opening, it usually takes 2 to 3 weeks for a complete mainland company setup. 

Free Zone: For Free Zone company formation in the UAE, Arabian Wingz, the setup process takes 3 to 7 working days, with many Free Zones like Meydan Free Zone that offer 60-minute and 24-hour setup options. 

12. Primary Target Audience

Mainland: The target audience of the mainland operations includes: 

• UAE Government and Public Sector contracts
• Local Customers and Private Companies
• Distribution and Retail, such as retail stores and e-commerce platforms
• Regional Gulf Cooperation Council markets

Free Zone: Free Zone companies target the following audience and market sector: 

• Foreign companies and Investors
• Import, Export, and Logistics Companies
• Tech, AI Startups, Freelancers, and Service Providers
• Consultancy Companies and Entrepreneurs 

Conclusion

Mainland and Free Zone, both jurisdictions offer distinctive and different benefits, whether in business setup, regulations, licensing or operational reach. By understanding these advantages and regulations, you can navigate a simplified company formation in the jurisdiction that suits your business needs and goals. This blog on mainland vs Free Zone UAE can help you compare both areas and select the one that suits your business. 

Arabian Wingz is a leading business setup consultant in the UAE. We offer tailored solutions for company setup to domestic and international entrepreneurs, SMEs, and enterprises. Our extensive services include company registration, trade licensing, VAT registration and filing, ISO certification, and more, while maintaining compliance with the UAE regulations. We are dedicated to working with you closely and providing consistent client support. Thus, partner with us and secure your UAE company formation consultation with us.