Dubai is a top choice for entrepreneurs and investors from all over the world. The United Nations trade body, UNCTAD, reports a significant rise in foreign investment for the UAE. In 2023, the country attracted a whopping $30.7 billion in foreign direct investment (FDI). This impressive surge places the UAE as the second-highest recipient of foreign direct investment (FDI) globally.
The city’s great location, top-notch infrastructure, and business-friendly environment make it perfect for starting a business. However, one of the key decisions that business owners need to make when setting up their company in Dubai is whether to choose a Mainland or Free Zone structure. Each option comes with its own set of advantages and considerations, so entrepreneurs need to understand the differences between the two.
Mainland businesses are regulated by the Department of Economic Development (DED) and can operate anywhere in Dubai and across the UAE. Free Zones are special areas in Dubai which offer benefits like 100% foreign ownership, tax breaks, and simpler administrative processes. Picking the right business setup is super important. It affects how your business operates, grows, and meets legal requirements.
Here we will explain everything you need to know about Mainland and Free Zone business setups. It will help you understand the rules and pick the best option for your business journey in Dubai.
Key Differences Between Dubai Mainland and Free Zone
A. Business Activity and Location
Mainland:
Mainland company formation in Dubai offers the widest range of business activities. You can choose from over 2,000 possibilities, allowing for greater flexibility and diversification.
Dubai mainland grants you the freedom to operate anywhere within the UAE. This is ideal if you want to serve the entire Emirati market.
Freezone:
Activities are usually limited based on the zone’s specialization. For instance, a media-free zone might focus on media and technology businesses, while a logistics-free zone caters to companies involved in import/export. However, some free zones offer specialized licenses or even dual licenses that permit limited operations within the mainland market.
B. Ownership Structure
Mainland:
Recently, the UAE implemented changes allowing 100% foreign ownership for specific activities on the Dubai mainland. However, for certain business types, a local Emirati sponsor is still required. It’s crucial to check the regulations for your chosen activity.
The most common structure for mainland businesses is the Limited Liability Company (LLC), which requires at least two shareholders.
Freezone:
Free Zone company formation in Dubai offers a significant advantage in terms of ownership. You can enjoy 100% foreign ownership for your company, regardless of the business activity. Like the mainland, the Limited Liability Company (LLC) is the free-zone company’s primary choice.
C. Business Setup and Regulations
Mainland:
The Department of Economic Development (DED) governs business setup in Dubai mainland. The process can involve more steps and approvals compared to free zones.
The business setup process in Dubai mainland typically includes:
- Choosing a business activity
- Choosing a business structure & trade name
- Getting initial approval from DED
- Preparing documents (passport, business plan, trade name certificate, MOU, etc.)
- Obtaining trade license
- Purchasing office on lease
- Opening a corporate bank account
- Visa application
Virtual offices are generally not permitted for mainland companies. You’ll typically need to secure a physical office space to meet licensing requirements.
Freezone:
Each free zone has its own dedicated authority that oversees companies set up within its boundaries. This often translates to a streamlined process. Many free zones offer the option to set up a virtual office. This allows you to maintain a business presence without the cost of a physical office, which can be a significant advantage for startups or companies with remote teams.
D. Taxation
Mainland:
Companies operating on the Dubai mainland are subject to a corporate tax rate of 9% on their taxable profits exceeding AED 375,000. There might be exemptions based on your company’s turnover.
Free Zone:
Free zones offer a significant advantage in terms of corporate tax. Currently, most free zones in Dubai are exempt from corporate tax for a specific period. This can be a major incentive for businesses looking to minimize their tax burden.
It’s essential to note that while free zones offer tax exemptions, they may have other fees associated with setting up and operating a business within the zone.
E. Visa Considerations
Mainland:
There are generally no restrictions on the number of visas a mainland company can sponsor for its employees. However, the number of visas ultimately granted will depend on the size and type of office space the company has. Larger office spaces allow for sponsoring more employees.
Freezone:
Free zones often have limitations on the number of visas a company can sponsor for its employees. This quota can vary depending on the specific free zone, the type of license you obtain, and your office space (if required). Each individual free zone authority has its own regulations and oversees the visa application process within its zone.
F. Business Setup Cost
Mainland:
The cost of setting up a business on Dubai mainland can vary depending on several factors, including the type of license, business activity, office space size, and chosen location. Generally, trade license costs start from AED 12,999, but the total cost can be higher.
Freezone:
Free zones often offer various company formation packages that can be more cost-effective than setting up on the mainland. These packages can start from as low as AED 7,000 and may include the trade license, visa processing, and other services.
Similar to the mainland, several factors can influence the final setup cost in a free zone:
- Different free zones have varying fee structures and packages.
- The license type will affect the fees associated with your business activity.
- The number of visas needed can impact the overall cost.
Here’s a key difference between Dubai Mainland and Free Zone:
| Feature | Mainland | Free Zone |
| Business Scope | Unrestricted (all UAE) | Limited (based on zone’s specialization) |
| Ownership Structure | 100% foreign (specific activities), otherwise local sponsor required | 100% foreign ownership allowed |
| Setup & Regulations | DED oversight, complex process, physical office required | Faster setup, fewer approvals, virtual offices possible |
| Taxation | 9% corporate tax (above AED 375,000, with exemptions) | Tax exemption (for a specific period, other fees may apply) |
| Visas | No restrictions (depends on office space size) | May have limitations on number of visas, higher visa costs |
| Cost of Setup | Generally, more expensive (trade licenses, office space, approvals) | Can be more cost-effective (packages available, but ongoing fees) |
What to Choose Between Dubai Mainland and Free Zone?
Choosing between Dubai Mainland and Free Zone depends on your specific business needs and goals.
Choose Dubai Mainland if:
- You want unrestricted business activity throughout the UAE.
- You plan to serve a large portion of the local mainland market.
- You require a large number of employee visas (depending on office space).
- You have a long-term vision of establishing a strong local presence.
Choose a Free Zone if:
- You prioritize minimizing initial setup costs.
- You operate in a specific industry aligned with a free zone’s specialization (e.g., media, logistics).
- You primarily focus on international trade and have limited need for the local market (initially).
- You value a streamlined and faster business setup process.
- You require a virtual office initially (offered by some free zones).
It’s always recommended to consult with a business setup specialist like Shuraa who can assess your specific situation and recommend the most suitable option for your business in Dubai.
Finding Your Perfect Fit, Get Expert Guidance!
Both Dubai Free Zone and Mainland options have their own benefits. Free Zones offer 100% foreign ownership, tax breaks, and easy setup processes which makes them great for businesses that focus on international trade or operate within the Free Zone. Mainland businesses, however, can operate anywhere in Dubai and the UAE, making them perfect for companies that need access to the local market.
Choosing the right option depends on your business needs and goals. It’s essential to get professional advice to make the best choice. At Shuraa Business Setup, we help you with everything from choosing the right area and setting up your company to handling paperwork, visa assistance, and more.
Let our experts guide you through the process and make starting your business in Dubai easy and successful. Contact us today to begin your business journey in one of the world’s top business hubs.