March 23, 2023
Mainland versus Free Zones: An Explanation

The UAE is among the top locations in the Middle East for business establishment. It is an international hub that offers opportunity to many different sectors and ethnicities. International investors find it to be quite attractive due to its liberal, stable, business-friendly climate and numerous business promotion efforts. You have a choice of establishing your business on the mainland or in a free zone. Like many people before you, you might be wondering what the distinction is between the two. Additionally, “How can I know which is the best decision?”

Depending on your organisation and its requirements, each solution has advantages, disadvantages, and investment potential. And in this piece, we’ll try to address those queries.

What is a mainland company?

Simply put, a mainland corporation is an onshore organisation that has registered with the appropriate emirate’s government body. Its commercial licence is issue by the Department of Economic Development (DED) of the Emirate. The absence of limitations on its commercial activity is the primary characteristic of a mainland corporation. For some business activities, however, you must have a local sponsor or a citizen of the UAE as a partner in the company.

What is a Free zone company?

The free zones are a great alternative to the mainland if you’d like to maintain complete ownership. The UAE’s first free zone established in the 1980s, and since then, it has expanded in size and scope. Over 45 free zones exist in the nation at the moment. Each free zone is run and govern by a separate regulatory body, and it complies with its own set of rules and laws. You can collect more informations from the Freezone company formation.

What distinguishes a free zone from the mainland?

So what distinguishes a free zone from a mainland? Each of the many different jurisdictions serves a certain corporate structure. The main distinctions are list below to assist you in selecting the one that is best for you.

Ownership: Up until recently, if you were a foreign investor starting a business on the mainland, you could only own up to 49% of it; the remaining 51% belonged to the Emirati sponsor. However, for a few businesses incorporated on the mainland, the UAE government currently permits 100% foreign ownership. Free zones don’t have these limitations and don’t require local sponsors because you have full ownership from day one.

Business scope: The key distinction between free zone and mainland businesses is that a free zone business need a local agent in order to conduct business outside the free zone. Companies from the mainland, who are allow to conduct business anywhere in the UAE, are exempt from this restriction.

Workspace:A physical office must be at least 200 square feet in size for a mainland corporation. The DED will provide your business a licence if you have acquired the necessary space. Since many free zones permit businesses to establish virtual workplaces, it is not necessary for free zone enterprises to provide a physical site.

Visas: There are no visa limitations for mainland businesses, but the quantity of visas awarded varies by workplace. Therefore, if your business needs more visas, you’ll need to buy or rent a bigger premises. Free zone businesses are subject to quotas on the amount of visas they can apply for, in contrast to mainland businesses. The quantity of visas often ranges from 1 to 6 and is determine by the rules of the free zone. Visiting the Residency visa for Iranian will also help you to gather more information.

Business setup approvals: For a mainland corporation, you would need government authorization from multiple different government organisations. These include the Ministry of Labor, Dubai Municipality, and the Department of Economic Development, among others. In contrast, each free zone adheres to its own laws and rules for any new enterprises opened within its borders. In addition, you can launch your business in a free zone without seeking approval from non-free zone government authorities or agencies.

Company audit:At the conclusion of the fiscal year, all mainland businesses are required to prepare a financial audit. Not all free zones, nevertheless, demand that businesses conduct their yearly financial audits. Only free zone businesses like FZE and FZCO are required to perform an audit at year’s end.

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