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If you're looking to set up a business in the UAE, it is important to get familiar with the various jurisdictions. From an investor's point of view, not having a clear understanding of the differences between Mainland and Free zone companies can be likened to traveling with no knowledge of its final destination. To ensure a successful investment in the UAE, it is crucial to become acquainted with the relevant information, rules, and regulations related to each of these jurisdictions. This blog will help you know the difference between a Mainland and a Free Zone company in the UAE.
An organization situated in the UAE that is formally registered with the respective Emirate's administration is denoted as a mainland company. It is granted a trade license by the Department of Economic Development of the particular Emirate. Mainland companies in the UAE provide restrictionless trading flexibility to their investors. These companies are allowed to engage in commercial activities not only within the UAE but outside UAE as well.
A business entity established in a particular emirate's special jurisdiction is known as a free zone company. These zones are managed by the Free Zone Authority, a government body that is in charge of trade license issuance. A free zone in the UAE provides companies with the advantage of 100% foreign ownership and tax exemptions. Free Zone companies in UAE are allowed to only engage in trade inside the free zone and outside the UAE.
Business Ownership: All businesses established inside the UAE's Freezones are entitled to complete foreign ownership. Emirati sponsors are no longer required to hold 51 percent of the shares in mainland companies, except for law firms, audits, schools, and government-related businesses.
Business Scope: Businesses operating in UAE Freezones that deal in tangible items are only allowed to engage in international trading with other Freezone firms or partner with a third-party supplier (local agency) to do business with the mainland. Mainland business owners can trade with companies in Freezones, other UAE mainland companies, and companies outside the UAE.
Banking: A corporate account is a key part of any business and can be established more quickly through a mainland license than a Freezone one. This is because a mainland license provides access to a work premium, which simplifies the bank verification process and accelerates all the necessary approvals.
Company Formation Process: In order to form a company on the mainland, an individual must be physically present in the country. An alternative is to utilize a Power of Attorney, which must be authenticated, authenticated again, and then authenticated in the UAE at the Ministry of Foreign Affairs (all in the individual's home country). However, it is possible to complete the Freezone business formation process without the owner having to be physically present in the UAE.
Work Premises: For companies operating in the UAE mainland, a physical place of business with an area of at least 140 sq. ft. is necessary. This can be in the form of a Flexi desk, a shared workspace, or an office. However, enterprises in Freezones must secure their office space either within the Freezone or the mainland through a business center only. It is even possible for companies engaged in professional services to operate without an actual office.
Are you looking to set up your business in the UAE mainland or Free Zone? If yes, then it is important to understand the major differences between them. Reyson Badger, one of the leading accounting and auditing firms in the UAE, can give you expert advice and guidance on setting up a business anywhere in the UAE. Our business advisors and consultants can answer all your queries and provide you with detailed information.