Introduction
The right choice of location and the right licencing option are crucial decisions for businesses seeking to establish their presence in the United Arab Emirates (UAE). The UAE has two main options for setting up a business: the free zone and the mainland. Each choice comes with its own advantages, disadvantages, and regulations. In this article, we’ll go over the distinctions between mainland and free zone options for business licences to assist you in making an informed choice for your business.
Mainland Business Licencing
Advantages:
Access to the Local Markets: Setting up a company in mainland Dubai allows you to run your business anywhere within the UAE as well as sell goods or services to local markets without any restrictions.
Flexible: Mainland companies have the freedom to engage in a variety of business ventures without the limitations set by specific free zone laws.
There is no limit on visas. Businesses in mainland countries can apply for as many visas as they need for their employees, subject to satisfying certain requirements and criteria.
Limitations:
51% ownership requirement for local owners Companies from the mainland require a locally based Emirati patron or partner that holds more than 51% of the ownership within the business. This partnership structure gives access to local markets but also requires the surrender of the majority ownership and control of the company.
Higher operating costs: The operation of a business on the mainland could have a higher cost of setup and operations in comparison to free zones, which include licencing fees, leasing costs, and visa fees.
Complex Licencing Processes: Mainland business establishments require the navigation of various agencies and government departments and can be time-consuming and complex.
Free Zone Business Licencing
Advantages:
100% foreign ownership Free zones permit foreign investors to hold all of their businesses, giving them total control and ownership without the requirement to have local partners.
Tax Incentives Free-zone businesses are usually exempt from both personal and corporate taxation for a specific time frame, which can result in significant savings for businesses.
Streamlined Setup: Compared to setting up a business on the mainland, free zones offer straightforward procedures and quicker setup times. They also have staff members who are solely focused on facilitating business formation.
Limitations:
Restricted Market Access Free zone businesses are generally prohibited from conducting commercial activities outside of the free zone, or in the UAE mainland market, without an agent or distributor local to them.
Limited Visa Quotas Free zone businesses are bound by visa quotas that are imposed by the free zone’s respective authority, which can limit the number of visas they can issue to employees.
Restrictions on Industry: Certain free zones are specifically designed to focus on specific industries like media, technology, health, logistics, or healthcare, restricting the types of companies that are allowed to operate within the zones.
Conclusion
The decision between free and mainland zone options for business licencing in the UAE is based on a careful assessment of your company’s goals as well as requirements for market access, ownership preferences, and costs. While mainland setup provides access to local markets and more operational flexibility, free zones can offer the benefit of 100% overseas ownership as well as tax benefits and streamlined set-up procedures.
Examine the benefits, drawbacks, and requirements for regulatory compliance of each to determine the most appropriate option for your company. If you decide to go with the mainland option or a free zone establishment, be sure to seek out professional assistance and guidance in navigating the process of setting up and ensuring that you comply with UAE rules. With the appropriate licencing options in place, you will be able to establish a strong foundation for your company and start your business venture in the ever-changing business environment within the UAE.
