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Setting Up Business in the UAE: Check Out The Differences Between Mainland And Freezone

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Staff Writer, TLR

Published on July 14, 2023, 17:41:00

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UAE one best economies businesses investors Middle

UAE is one of the best economies for businesses and investors in the Middle East. UAE is stable, liberal, and business-friendly and is a favorite hub for various business initiatives. UAE has always received international investors with open hands and has enacted legislation for ease of company formation.

Before starting a business in UAE, we need to understand its two different economic jurisdictions, namely, Mainland and Free-zone. 

Mainland/Onshore Company Freezone Company
Ownership

Previously, only 49% of ownership was allowed to foreign investors, whereas the remaining 51% belonged to Emirati sponsors. Recently The UAE government has approved 100% foreign investment in mainland companies.

Foreign investors can enjoy 100% absolute ownership. Local sponsors are not required.                                                                                                                                                                                                                           

Approvals

Mainland companies need approvals from various government bodies like the Department of Economic Development, Municipality, Ministry of Labour, etc                                                                                                              

Freezone companies have their own set of rules and regulations, which are equally applicable to all companies formed in a particular free zone. Approval from government bodies and agencies that do not belong to the free zone is not required.
Scope of Business Mainland companies are free to do business anywhere inside and outside UAE                                                                                             Freezone Companies are allowed to do business only within the jurisdiction of registered free zones, as well as outside UAE.
Work Premises

Mainland Companies are required to have a minimum office space of 140 sq. ft in UAE (except for businesses without instant licenses)                                                                                                                         

Office space requirement is not mandatory for a Freezone Company. Even virtual offices are allowed.Office space requirement is not mandatory for a Freezone Company. Even virtual offices are allowed.
Visa Eligibility There is no restriction regarding visa eligibility. The area of the workspace determines the number of visas issued. There is no restriction regarding visa eligibility. The area of the workspace determines the number of visas issued.
Trade License All type of Trade License is available for mainland company Availability of Trade License differ from free zone to free zone
Financial Audit Audit is mandatory for all UAE mainland company                                                             Audit is not mandatory for free zone companies. Certain jurisdictions are exempted from Audit preparation.
Capital requisite Minimum capital requisite is determined by legal structure                                                     Minimum capital requisite is determined by the Emirate in which the company is formed (the amount could vary)
Tax Exemption Corporate Tax of 9% will be levied to most businesses with profit above AED 375,000 from 2023 onwards Tax exemption is given to all free zone companies                                                           
Emiratization All mainland companies are required to achieve the Emiratization target                                                                                                    Freezone companies are exempted from Emiratization. However, free zone companies are encouraged to hire Emirati locals.             

Unemployment Insurance Scheme

This scheme is mandatory for employees of Mainland Companies Employees of Freezone Companies are exempted             

Which is better?

If a company wants to establish itself virtually and does not want to get into the legalities of company formations, then Free Zone License is a good option. On the other hand, if the company wants to establish itself with a good market presence, and wants to trade with other companies established in the UAE market, getting a mainland license is a preferable option.

For any enquiries or information, contact ask@tlr.ae or call us on +971526443004

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