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UAE Mainland vs.
Free Zone vs. Offshore

 

What are the jurisdictions or locations for 

setting up a business in Dubai and the UAE?


1. The UAE Mainland Jurisdiction

In order to understand what Mainland means, we have to go back in time to see how things were structured and what laws have changed.

In the past, Limited Liability Companies (LLCs) in the mainland required a local shareholder owning 51% of the company.

And Branches of foreign entities required a UAE national to be appointed as “Agent or Sponsor” in the branch office. This agent or sponsor does not own anything in the branch office, but his/her mere job was to facilitate the branch’s errands (visas, access to government portals, etc.) with the regulatory authorities.

Whereas in LLCs, the local shareholder would legally own 51% of a company but he or she will not necessary be the ultimate beneficial owner of the company.

For this reason, Mainland companies were and are still integrated directly within the UAE’s domestic market. And we can say that they are unrestricted in their business activities in the UAE.

The UAE Mainland Jurisdiction


So what authority is responsible for
regulating the mainland companies?

what authority is responsible for regulations the mainland companies

Well, it is the Department of Economy and Tourism in Dubai and in other Emirates it is the Department of Economic Development.

It is for you to note that each of the seven UAE emirates has its own mainland regulatory authority:

  • Abu Dhabi Mainland
  • Dubai Mainland
  • Sharjah Mainland
  • Ajman Mainland
  • Fujairah Mainland
  • Ras Al Khaimah Mainland
  • Umm Al Quwain Mainland


How a mainland company is setup in Dubai?

How Much Does It Cost to Set Up a Company in UAE Free Zone

 

 

More or less, Mainland company formation in Dubai follows a standard process. First, obtain an initial approval, reserve the company name, submit an application, sort out your office space and receive your license. It is to note that you may only proceed with your visas and residency once you obtain your business license.

In some instances, Dubai mainland company may be more expensive than a free zone company. This is attributed to two main reasons. One, is that in the mainland company there are plenty of fees that are charged to the investors from various government authorities that may not be related to you. For example, on your business license cost receipt, you find some fees and charges such as:

  • Government Cultural fee
  • Fees for Department of Economic
  • Electronic transaction data entry
  • Fees for Administrative Services
  • Smart Social Responsibility Platform fees

 

The second reason why Mainland Dubai license may cost more is that your license fee is linked to your office rental space. In general, there is a fee of 5% of your annual office rent in your business license.

And then the question arises… Why would I open a company in the mainland and not in a Dubai Free Zone?

How a mainland company is setup in Dubai

What is the difference between a free zone and mainland?

Mainland companies can operate in the Emirate they are established. However, a free zone company can only do business within the free zone it is established in, with other UAE free zones and with companies outside the UAE.

An easier example to understand is that, if you wish to open retail shop in a mall, it is almost in all cases required to have a mainland company to do so, unless there was an exception for any particular reason.

Can a free zone company do business in mainland? And the strict answer is no! This is the main difference between a free zone and mainland companies. A free zone company can do business with other free zones companies or with companies located outside the UAE. It is to note however, when it comes to services, it is common practice for free zone companies to perform such services to mainland companies.

For some reason this is a grey area and currently the regulatory authority are ok with.

Another common question is that, can a free zone company trade in the mainland?
Well, a free zone company cannot import goods into the UAE local market (mainland). It can only do so if it has branch in the mainland or through an agent (a mainland company) who acts as the importer into the mainland.

difference between a free zone and mainland


2. The Free Zone Jurisdiction

Free Zone Jurisdiction

By now we made it clear what a mainland company is and what is the difference between mainland and free zone. But here are further explanations on the UAE free zones.

Free zones are areas located in specially designated locations and they cater to specific industries. For example, if you are into health care, you are to set up your company in “Dubai Health Care City”. If you are an institute, then you go to “Dubai Knowledge Village”. If you are a regulated bank or insurance company, then for sure your options are Dubai International Financial City or Abu Dhabi Global Market.

Free zones offer 100% foreign ownership without the need for a local partner or sponsor. In the past, free zones were more attractive since the rule of 51% ownership in the mainland was a no go for a lot of foreign investors.

Today, the mainland also offers 100% foreign ownership to a wide range of activities. Still there are some activities that require 51% local ownership or even only permitted to have 100% local ownership.

What we currently see in relation to Dubai free zones is that they are mainly used for trading hubs or holding foreign assets.

When you set up your company in a free zone, then you do not pay import duty on the storage of the goods. This is perfect since Dubai and the UAE in general is the main trading hub in the Middle East and North Africa.

And lastly setting up in a UAE free zone is quite easy. Free zones have online portals, and you only need to deal with the particular free zone authority to set up your business and sort out your visa and residency requirements.

And if you wish us to review your case and provide you with expert feedback, here is a 7-step questionnaire for you to complete and for us to assess and get back to you.


3. Offshore Free Zones

What is an offshore company in the UAE?

UAE offshore companies are designed for international businesses wanting a UAE-based entity without actual operations in the country.

UAE offshore companies allow 100% foreign ownership and assure total confidentiality of operations. They are mainly used for holding structures, international trading, and asset protection.

The offshore company does not require you to rent a physical office space within the UAE. However, your offshore company’s address is the agent’s address who establishes your company.

Furthermore, offshore companies can own real-estate in the UAE but do not allow you to obtain a UAE residency.

offshore company in the UAE

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