UAE Business Setup: Mainland Vs. Free Zone

Business setup UAE offers a wealth of opportunities, but one of the crucial decisions entrepreneurs must make is whether to establish their company in the mainland or a free zone. Each option comes with its own advantages and limitations, catering to different business needs. Here, we explore the key differences between mainland and free zone business setups in the UAE:

Mainland business setup:

Local market access: Mainland businesses have unrestricted access to the UAE’s local market, allowing them to trade freely with other mainland and free zone companies. This can be advantageous for companies targeting the local consumer base.

Greater business flexibility: Mainland businesses can engage in a wide range of activities without industry-specific restrictions, making it a flexible option for diverse business models.

Government contracts: Mainland companies can bid for government contracts and projects, which can be lucrative in sectors like construction and infrastructure.

Challenges of mainland business setup:

Local sponsorship: Unless the business falls under specific free zones, mainland companies often require a local sponsor, which typically holds 51% ownership in the company. While this arrangement is common and well-regulated, it means sharing profits and decision-making with the local partner.

Import/export duties: Mainland companies may incur import and export duties, impacting the cost of international trade.

Licensing costs: Setting up a mainland company can involve higher licensing and registration costs compared to some free zones.

Free zone business setup:

100% foreign ownership: One of the most significant advantages of free zones is that they allow for 100% foreign ownership, eliminating the need for a local sponsor or partner.

Tax benefits: Many free zones offer tax incentives, including zero corporate and personal income tax for a specified number of years.

Customized licensing: Free zones are often industry-specific, providing tailored licensing options and infrastructure for certain sectors like technology, media, healthcare, and logistics.

Challenges of free zone business setup:

Limited local market access: Free zone companies typically have restricted access to the UAE mainland market. To operate outside the free zone, they often need to partner with mainland businesses or distributors.

Industry restrictions: Depending on the chosen free zone, some business activities may not be permitted, limiting the scope of operations.