There are two options available when one wants to set up a business in the UAE: free zones and mainland. Each option has its own set of advantages and disadvantages depending on one’s objectives, business sector and operational requirements. This blog will assist you in evaluating both pros and cons of each so that you can choose which option is more appropriate for your business.
What is a Free Zone?
Free trade zones are special areas in the United Arab Emirates where foreign investors can invest without paying certain taxes and where they can own the entire investment. Such zones are limited to some specific industries, for instance technology, media, or logistics and offer state of the art facilities designed for business purposes.
Benefits of Free Zones
- 100% Foreign Ownership: No need for a local sponsor.
- Tax Advantages: Zero corporate and income taxes.
- Specialised Hubs: Industry-focused zones for enhanced networking.
- Simplified Setup: Easy licensing and registration processes.
- Duty-Free Trade: Exemptions on import/export duties within the free zone.
Limitations of Free Zones
- Restricted to operating within the free zone or international markets.
- Additional approvals are required for trading in the UAE mainland.
What is the Mainland?
The Department of Economic Development (DED) grants licenses to mainland businesses in each emirate. These businesses can be set up anywhere in the United Arab Emirates and outside.
Benefits of Mainland Businesses
- No Geographical Restrictions: Trade freely across the UAE.
- Access to Government Contracts: Eligible to bid on lucrative public sector projects.
- Broad Business Activities: Engage in a wider range of activities compared to free zones.
- Retail and Service Opportunities: Ideal for businesses targeting local customers.
Limitations of Mainland Businesses
- Local sponsor requirement for some business types (51% ownership).
- Potentially higher setup and operational costs.
Key Considerations
- Ownership: In free zones, one can have full ownership, on the other hand, mainland companies might need one local sponsor except for the cases where it is 100% foreign owned based on stated conditions.
- Market Reach: Via the mainland the trader can carry out an unlimited trade at any time, within the territory of the UAE; free zones are more appropriate in case of international business operations.
- Costs: Free zones have lower startup costs, but mainland businesses offer greater flexibility for expansion.
- Industry Requirements: Some industries, like retail or healthcare, are better suited for mainland operations due to their local reach. Looking for Company Formation in UAE?
Which Should You Choose?
- Choose Free Zone: If your focus is international trade, exports, or specific industries like tech, logistics, or media.
- Choose Mainland: If you need to target the local UAE market or plan to expand your business geographically.
Call +971 56 658 2477 for Business Setup Service in the UAE
Both free zone and mainland options are designed to meet the needs of various businesses with their own unique benefits. In order to take the correct decision, it is essential to know the specifics of the industry, the market aspirations and operational needs. Whatever the case, it is guaranteed that there are many growth empowering prospects in the business in the UAE for any investor.