Starting a business in Dubai is a very exciting and profitable journey for entrepreneurs. In fact, every year, thousands of entrepreneurs and investors are coming to the city to create something big of their own. This is because of the top-class business environment and facilities you get in Dubai. The infrastructure, the strategic location of the city, the government support, and the unbeatable tax savings are some of the many benefits of setting up a company in Dubai. When starting a venture in Dubai, entrepreneurs often face a crucial decision of selecting either a Dubai freezone company formation or mainland company formation.
These two are jurisdictions, economic zones in Dubai, where businesses can be established. But the question arises: how do you choose the right jurisdiction for your business? Well, let’s find out in this blog.
Freezone company formation: meaning and advantage
Freezones, also called free trade zones, are special economic areas in Dubai where one can start a business. These economic zones have their own respective governing authority and specialize in a diverse range of industries. Business setup in Dubai freezone can trade within that designated zone and internationally. However, for trading in the rest of Dubai, there may be other legal procedures to follow, such as hiring a local distributor or agent.
All companies operating in a freezone must obtain a business license from the respective freezone authority they have chosen. In Dubai, there are more than 30 amazing freezones that offer cost-effective and efficient business setup solutions. Some famous names include International Freezone Authority (IFZA), Dubai Media City, Dubai Silicon Oasis, Meydan Freezone, Dubai Internet City, etc.
Dubai freezone company formation offers many advantages, including:
- 100% ownership of their business
- 100% repatriation of profit and capital
- No need for a partnership with local sponsors
- Cheaper and faster business setup process
- Industry-specific support and facilities
- Huge tax benefits, including 0% personal income tax
Mainland company formation: meaning and advantages
Mainland refers to the areas that lie outside the freezones. Regulated by the DED, mainland companies can operate and conduct their business activities across the UAE without any restrictions. All businesses must obtain their licenses from the DED only.
Although, according to recent changes in the law, many activities no longer require a local sponsor, some activities may still mandate a local sponsor or a UAE national to be a partner in the company.
Here are the advantages of mainland company formation in Dubai:
- Sell your products and services freely across the UAE markets
- Wider business activity options compared to freezone business setup
- Allows more work visa applications based on office size
- No currency limitations for businesses operating on the mainland
Difference between mainland and freezone business setup
Let us first understand on what key points do Dubai mainland and Dubai freezone company formation differ from one another. Take a look at these differences and it can help you take better decision:
Regulation:
Dubai freezone: Freezones are regulated by their own independent regulating authorities.
Dubai mainland: Mainland is regulated by the Department of Economic Development (DED).
Ownership:
Dubai freezone:Business setup in Dubai free zone allow expat entrepreneurs enjoy 100% ownership of their businesses.
Dubai mainland: on mainland, you still may need to partner with local sponsor to start certain types of businesses.
Market access:
Dubai freezone: The market access for freezone businesses is limited to that freezone and international markets.
Dubai mainland: Mainland businesses enjoy conducting business across the UAE freely.
Business scope:
Dubai freezone: In freezone, you can choose among the business activities allowed by that particular freezone.
Dubai mainland: On mainland, there is a very broad range of business activities that you can choose from.
Workspace requirements:
Dubai freezone: Dubai freezone company formation allows more flexible office options.
Dubai mainland: Typically, there are more stringent office space criteria for most businesses.
Cost effectiveness:
Dubai freezone: The cost of setting up business in Dubai freezone is lower, which may differ from one freezone to other.
Dubai mainland: Cost of starting a business on mainland can be higher comparatively. Yet, it also depends on your business nature and needs.
Tax benefits:
Dubai freezone: Freezones are mostly tax free, and there can be corporate tax but very low rate for some businesses.
Dubai mainland: Typically, mainland companies are subject to VAT and other corporate taxes.
Choosing the right zone for your business
Selecting the ideal jurisdiction for your business is a very crucial decision. If you are not sure where to start your business in Dubai, on mainland or in freezone, consider asking yourself these questions:
- What are your business needs?
If you want to expand locally, mainland would be a better choice. For focusing on international markets, freezones can be better.
- What business activities do you want to pursue?
The jurisdiction you choose must allow the business activities you want to pursue.
- How many visas do you need for employees?
Mainland company formation in Dubai usually offers more visa quotas for employees, based on office space requirements.
- What is your target market?
If you want to cater to international clients, go for a freezone. If you want to serve UAE nationals, choose mainland.
- What ownership structure do you desire?
For enjoying 100% ownership of your business, freezones are a better choice, as mainland may require a local partner for certain activities.
- What is your business setup budget?
If you are a startup, considering a Dubai freezone company formation can be a cost-effective option.
Conclusion
Both mainland and freezone business setups have their own advantages and legal procedures. What would be most suitable for you depends on your business nature, needs, goals, budget, and more. To simplify the decision and make the correct choice, we recommend getting in touch with business setup consultants in Dubai.
Dubiz Business Setup has been helping entrepreneurs launch in Dubai for years. They have the right expertise and network to make your business formation in Dubai hassle-free and simplified. Moreover, they can handle the legal structuring, licensing, visas, and more for your business. Book a free consultation with them today!
