Setting up a business in the United Arab Emirates (UAE) requires making an important choice right at the start – should you establish your company in one of the many free zones or set up on the mainland? Both options have their own unique benefits and practical considerations.
This comprehensive guide will discuss all key aspects to help you decide what works best based on your entrepreneurship plans and priorities:
Free Zones Offer Attractive Ownership and Tax Incentives
The many free zones across Dubai and UAE provide excellent infrastructure and services for global business owners and investors looking to set up operations here. Some major advantages of launching in a free zone include:
- 100% Foreign Ownership: Investors can fully own the company without needing an Emirati partner. This is especially useful for entrepreneurs looking to retain full control.
- Full Repatriation of Profits: You can transfer all the earnings made here back to your home country or elsewhere without any tax.
- Corporate Tax Exemption: All free zone companies enjoy a full income & corporate tax holiday for a period of 15-50 years typically. This allows major cost savings.
- Fast Setup and Approvals: The registration and licensing processes to establish a free zone company are much faster, easier and hassle-free compared to mainland.
- Global Workforce: You can employ a fully foreign staff. This provides the flexibility and cost benefits regarding salaries, visas etc.
So ecommerce, technology, consulting and other non-trading firms often find free zones highly suitable for the business model. The subsidized costs and ownership incentives allow them to focus on scaling globally.
Mainland Registration Provides Access to Wider Local Markets
The key advantage with a mainland trade license is the ability to cater to much larger consumer markets across UAE. A company registered on the mainland can open offices, retail stores or warehouses in any emirate. This physical presence and access helps when serving onshore customers.
Additionally, having a mainland base also lends more credibility in the perception of local clients, especially government departments, institutions and long-time Emirati-owned businesses. There is also the option of partnering with a local Emirati service agent or sponsor if that strategic relationship holds value.
Startups and SMEs focused squarely on the domestic consumer markets may find the mainland route more practical in the long run.
Cost Factor Comparison of Setting Up in Free Zone vs Mainland
- License Fees
- Mainland: Typically AED 3,000 to AED 8,000 per year
- Government Services Fees
- Free Zone: None generally
- Mainland: Starts at approximately AED 15,000
- Other Compliance Costs
- Free Zone: Minimal trade license renewals
- Mainland: Includes charges for various approvals, employee visa fees
- Operational Expenses
- Salaries, leasing space, utilities etc. tend to be lower on mainland
While free zones clearly subsidize the setup costs, recurring compliance fees and visa charges add up on mainland over time. The breakeven point is usually around 2-3 years from business commencement.
Key Factors to Consider When Making Your Choice
There are a few key questions you should answer that will guide your decision making:
- Is your target audience global or domestic within UAE?
- How important is full foreign ownership or potential Emirati partnerships?
- What is your budget allocation capability between initial license cost vs long term operational expenses?
- Does your industry or business model inherently prefer free zone or mainland benefits?
Analyse the above factors to determine whether it is more prudent to set up in a free zone or on the mainland. Reach out to a reputed corporate services adviser like Company Name to help you make the right strategic choice.
Conclusion
Carefully Assess Which Option is Better Suited For Your Business Goals
Deciding whether to set up your company in a UAE free zone or on the mainland is an important strategic choice that can impact future success and growth. There is no universally better option – each has tangible benefits catering to different business scenarios.
Free zones provide attractive incentives around ownership, taxes, and access to global talent. It allows focusing on products/services first before expanding locally. Mainland setup grants you access to wider domestic consumer markets right from start. It also opens up chances for beneficial Emirati partnerships.
FAQs
Yes, it is permitted to have dual licenses – one in free zone and another on mainland. It provides the combined benefits but also doubles the compliance obligations and costs.
No, each has distinct advantages catering to different business scenarios. You have to assess based on your own priorities and target markets.
Yes, you can apply for re-domiciliation at a later date after meeting regulatory approvals. But it is best to evaluate thoroughly at the outset itself.
