For entrepreneurs and new business owners, selecting the type of business can be a tough decision, given that each model has unique advantages.
The most common business setup types in Dubai are free zone and mainland companies, which provide distinctive opportunities for owners to build brand presence in the market. In the blog below, you can learn whether mainland or free zone Dubai is the right fit for your business needs.
First, mainland company formation Dubai, which is also known as an onshore establishment, is licensed by the Department of Economic Development (DED) to operate anywhere in the seven Emirates, including the free zone areas. With access to local markets and customers, these types of enterprises are the most common types of establishments seen in the retail and service industries, where multiple branches can also be opened under one license.
Previously, the law required a local sponsor in Dubai to own 51% of the company’s shares, but since 2020, the law has been amended to permit 100% foreign ownership. This company type grants visas without any cap limitations; they are merely dependent on the area of office space being rented, with bigger spaces entitling business owners to more visas. As an estimate, for every 80 square feet of space, one visa permit is given. In addition to this, corporate tax exemptions are also provided, along with a 100% capital and profit return with no currency restrictions.
It is important to mention that mainland companies are required to have an office space with an expanse of a minimum of 200 sq. ft., so capital investment for this type of business is higher in comparison to others. Moreover, the general cost of setting up the establishment is also high, given the license and local sponsorship fees as well as costs related to attestation, registration, and notarization processes.
Moving on to Freezone company in Dubai, foreign investors can also enjoy 100% ownership without the need to divide any company shares with a local sponsor in Dubai or a service agent. They can choose from a variety of options for office spaces that vary from using a Flexi desk, a virtual office, or a physical rental expanse. Furthermore, the lease plans provided for this license extend over 25 years with additional amenities, including warehouse facilities, production and assembly line areas, and others. The visa provisions are dependent on the type and size of office space selected, with an average of three to six visas being allocated to free zones.
Similar to a mainland corporation, free zone companies are also permitted 100% capital and profit return, without restriction on the currency and with an additional allowance of free transfer of funds. These types of companies are not accountable for paying any export or import fees either, allowing for larger financial gains. Recruitment policies are also favourable to the owners, and the entire process of establishing a free zone company, from registration to the start of business activity, takes only three to five days as a whole.
However, business owners must be aware of a few details regarding this type of company. Free zone establishments are not allowed to run any businesses on the mainland, and a new license is needed to begin a new line of business there. Notably, the UAE government recently approved a dual license for capitalists looking to run a free zone and mainland corporation simultaneously under a single permit, but this option is limited to the Emirate of Ras Al Khaimah. Also, appointed local distributors can only be used if a local business is pursued under the usual single free zone license.
In addition, the expenses related to such a company include the investment fee of the area selected as well as the costs related to registering the business, gaining the license, office rental payments, and share capital. Finally, as visa numbers are limited to office space and size, in such companies, three visas are permitted for Flexi desks, four to five for serviced offices (depending on the layout), and one for about every 100 sq ft of physical space.
No matter what type of company you choose to pursue, get expert help from our business setup consultants in Dubai at Best Solution, which specializes in providing creative and effective management solutions for your startup or corporation in the UAE.
