When considering registering a company in Dubai or any other UAE emirate, a crucial decision is whether to incorporate in the Mainland or a Freezone. Each option has its advantages, and the right choice depends on various factors specific to your business needs.
Mainland vs. Freezone: 7 Key Differences to Consider
These distinctions are relevant across all 7 emirates: Abu Dhabi, Dubai, Ras Al Khaimah, Sharjah, Umm Al-Quwain, Fujairah, and Ajman. Regardless of where your company is registered, you can open a bank account anywhere in the UAE.
- Corporate Tax Rates
As of June 1, 2023, Mainland companies are subject to a 9% Corporate Tax on profits exceeding AED 375,000 per year. In contrast, Freezone companies benefit from a 50-year Corporate Tax exemption. For businesses aiming to avoid Corporate Tax, registering in a Freezone is advantageous. - Type of Clients
Mainland companies can easily engage with both domestic and international clients. Freezone companies, however, are restricted in their dealings with Mainland businesses. International clients often prefer Freezone companies unless they specifically require a Mainland entity. - Office Space Requirements
Mainland companies must have a minimum office space of 200 sq ft, while Freezone companies can operate from a virtual office, offering cost savings and flexibility. - Approving Authority
Mainland company licenses are issued by the Department of Economic Development (DED), with consistent regulations across all locations. Freezone companies are licensed by their respective freezones, which may have varying rules and compliance requirements. - Time to Set Up
Setting up a Freezone company is typically faster as freezone authorities handle licensing. Mainland company registration may involve longer processing times due to additional approvals from the DED. - Foreign Business Ownership
Freezone companies can be fully owned by non-UAE nationals. In Mainland companies, some types require a local UAE national to hold 51% of the shares, with the remaining 49% owned by the foreign partner. - Visa Restrictions
Mainland companies can issue visas based on their office space size, with more space allowing for more visas. Freezone companies face restrictions on the number of visas they can apply for, usually ranging from 1 to 6 depending on the freezone.
Additional Considerations
- Transferring a company from Mainland to Freezone is not permitted. To switch, you must dissolve the Mainland company and establish a new Freezone entity. Some entrepreneurs opt to register companies in both to leverage the benefits of each.
- Freezone companies enjoy customs duty exemptions on imported goods, unlike Mainland companies which are subject to customs duties.
- With over 40 Freezones in the UAE, choose carefully based on your industry and location preferences. Some Freezones are industry-specific, like Dubai Internet City, while others, such as Dubai Multi-Commodities Centre (DMCC), serve various industries.
- Regardless of registration type, UAE residence visas and Emirates IDs have the same validity period.
