One of the first and most critical decisions when setting up a business in the UAE is choosing between a Free Zone and a Mainland jurisdiction. Each has distinct advantages and limitations that can significantly impact your business operations, costs, and market access.
What is a Free Zone Company?
A free zone is a special economic area, typically dedicated to a specific industry, that offers tax concessions and customs duty benefits to expatriate investors. There are over 40 free zones in the UAE.
Best For:
- Businesses that trade internationally or provide services to clients outside the UAE.
- Startups looking for a lower-cost setup with flexible office options.
- Holding companies and consulting firms.
What is a Mainland Company?
A Mainland company (also known as an "onshore" company) is licensed by the Department of Economic Development (DED) of the respective emirate. This structure allows you to trade directly with the local UAE market without restrictions.
Best For:
- Businesses that need to sell goods or services directly within the UAE (e.g., retail shops, restaurants).
- Companies wanting to work on government contracts.
- Businesses that require a physical office or showroom in the heart of Dubai.
| Factor | Free Zone Company | Mainland Company |
|---|---|---|
| Business Scope | Trade within the free zone and internationally. Cannot trade directly in the UAE mainland. | Trade anywhere in the UAE and internationally without restriction. |
| Ownership | 100% foreign ownership allowed. | 100% foreign ownership for most activities. Some strategic sectors may require a local partner. |
| Corporate Tax | 0% on "Qualifying Income." 9% on other income (e.g., from mainland sales). | 9% on profits above AED 375,000. |
| Office Space | Flexible options, including "flexi-desks" (shared desks). Physical office not always mandatory. | Physical office space registered with Ejari is mandatory. |
| Visas | Number of visas is often tied to the size of the office or flexi-desk package. | Generally more flexible visa eligibility, but tied to having a physical office. |
Which one is right for you?
The choice is simple: **If your primary market is within the UAE, you need a Mainland company.** If your business is internationally focused, a Free Zone company is almost always the more efficient and cost-effective option.