The choice between mainland and free zone is the most significant during the business setup process. These are the major jurisdictions to choose from when starting a company in Dubai. Each has its perks and benefits. The choice should lie in the future goals and operational details of the company.
This guide walks you through everything you should know about mainland companies and free zone companies. It assists you in making the best choice for your setup.
Introduction to Mainland Companies
The mainland is the part of Dubai that is outside the free zones. It is controlled by the Dubai Department of Economy and Tourism (DET), previously known as the Department of Economic Development (DED). Businesses in the mainland can trade anywhere in Dubai, across the UAE, and also work with the government.
They do not have the limits that free zone companies face when selling inside the UAE market. Mainland companies can also open offices anywhere in the city. This makes them a good choice for businesses that want to serve local customers directly or have a physical shop in Dubai.
Key Benefits of Mainland Companies
- Can trade anywhere in Dubai and across the UAE
- Can work directly with government clients
- No limits on the number of visas (depends on office size)
- Can open offices anywhere in Dubai
- Flexible for all business types and activities
- Easier for retail and service businesses targeting locals
Step-by-Step Setup Process for Mainland Companies
Starting a Mainland business in Dubai follows these main steps:
- Trade Name Reservation: Choose a unique business name and get it approved by the Dubai Department of Economy and Tourism (DET).
- Initial Approval: Apply for initial approval so you can start the rest of the setup process. This shows that the government has no objection to your business activity.
- Office Lease: Rent an office space anywhere in Dubai. You will need a tenancy contract (Ejari) for your business license.
- Final License Issuance: Submit all documents, pay the fees, and receive your mainland trade license.
Introduction to Free Zone Companies
Free zones are special areas in Dubai made for business. They are run by their own free zone authorities. Companies in free zones get benefits like full foreign ownership, no customs duty, and easy setup. Many free zones focus on certain industries, like media, technology, or trade.
Businesses here can work with clients outside the UAE and inside their own free zone. However, they cannot sell directly to the UAE market without using a local agent. Free zones are a good choice for companies that deal mostly with international customers.
Key Benefits of Free Zone Companies
- 100% foreign ownership allowed
- Lower setup costs compared to Mainland
- Full repatriation of profits and capital
- No customs duty on imports within the free zone
- Industry-specific zones with networking opportunities
- Simple and fast company setup process
Step-by-Step Setup Process for Free Zone Companies
Starting a free zone business is usually faster and simpler:
- Choosing the Right Free Zone: Pick a free zone that matches your industry, like media, trade, or technology.
- Submitting Documents: Provide your passport copy, application form, and any other required documents.
- Paying Fees: Pay the license and office fees to the free zone Authority.
- Getting Your License: Once approved, you will receive your trade license and can start your business.
Mainland vs Free Zone – Key Differences in Dubai, UAE
| Feature | Mainland | Free Zones |
| Ownership | Up to 100% foreign ownership for most activities (some may need a local partner) | 100% foreign ownership allowed |
| Business Scope | Can trade anywhere in the emirate, across the UAE, and with government | Can trade internationally and within the free zone; need a local agent to sell in UAE market |
| Office Location | Can open office anywhere in the emirate | Must have office inside the chosen free zone |
| Regulator | Dubai Department of Economy and Tourism (DET) | Specific Free Zone Authority |
| Setup Time | Usually longer than free zones | Often faster and simpler |
| Industry Focus | All kinds of businesses | Many free zones are industry-specific (e.g., media, tech, trade) |
| Cost | May be higher depending on office size and location | Usually offers cheaper setup packages |
| Visa Quota | Based on office space size | Limited at first, can be increased by upgrading office |
| Market Access | Full access to UAE local market | Limited access without local distributor or branch |
| Reputation | Seen as more flexible for local operations | Attractive for global business and tax benefits |
Costs Involved in Mainland vs Free Zone Business Setup
When starting a business, your costs will depend on whether you choose the mainland or a free zone. The following are the costs involved:
- License Fees: Free zones often have lower license fees compared to the mainland, but prices vary depending on the activity.
- Office Rent: Mainland allows offices anywhere in Dubai, which can be costly in prime areas. Free zones offer flexible desk and office packages.
- Visa Costs: Both options require fees for visas, but mainland visa quotas depend on office size, while free zones have set packages.
- Renewal Charges: Licenses must be renewed every year. Renewal in free zones is usually quicker and cheaper, but mainland renewals give more flexibility for location and market access.
Difference in Cost Structure
| Cost Type | Mainland (Approx.) | Free Zone (Approx.) |
| License Fees | AED 10,000 – AED 15,000 | AED 6,000 – AED 12,000 |
| Office Rent | AED 15,000 – AED 50,000+ (depends on size/location) | AED 5,000 – AED 20,000 (flexi-desk or small office) |
| Visa Costs | AED 3,000 – AED 5,000 per visa | AED 2,500 – AED 4,500 per visa |
| Total Setup Cost | AED 28,000 – AED 70,000+ | AED 14,000 – AED 40,000+ |
How to Choose Between Mainland and Free Zone
Choosing between the mainland and a free zone depends on your business goals. You should look at your target market, budget, industry, and long-term plans before making a decision. The following are the factors that should be considered during decision-making:
1. Target Market
If your main customers are across the emirate or across the UAE, the Mainland is better because you can sell directly in the local market. If your clients are mostly outside the UAE, a free zone might be enough.
2. Budget
Free zones often have lower startup costs and offer packages that include office space and visas. The mainland setup can cost more, especially if you need a large office in a busy area.
3. Industry
Some industries work best in certain free zones, like technology, media, or trade. The mainland is open to almost all types of businesses without such limits.
4. Future Growth Plans
If you plan to expand into the UAE market, hire more staff, or open branches, the mainland gives you more freedom. If you plan to focus on international trade or a specific niche, free zone could be a better choice.
Get Help in Decision Making and Setup Process
This guide provides you with everything to make the best decision for yourself. However, it can still be a tough choice for many companies considering their preferences and future goals. Furthermore, the company formation process can take a while and cause you many complications if you do not understand the steps properly.
Solution? Contact IBG Consultancy to get a free consultancy session today. With years of experience in the field and leading business consultants in the UAE, we assist you in making the best decisions for your company while providing the most suitable packages. Instead of facing operational challenges during the process and regulatory shortcomings, contact us today to access smooth company formation planning and process.
Frequently Asked Questions (FAQs)
1. What are mainland and free zone companies?
Mainland and free zone companies are the two main business structures in the UAE. Each has its own rules, business activities, benefits, and limits depending on where and how you want to operate.
2. What is a freezone in the UAE?
A freezone is a designated business area with special benefits like 100% foreign ownership and tax advantages. Freezone companies often have limits when selling in the local market.
3. What are the main differences between mainland and free zone setups?
The differences between free zone and mainland businesses include ownership rules, office location, market access, and allowed activities. These key differences help you decide the best option for your company.
4. What does UAE mainland mean for business owners?
UAE mainland refers to all areas that are not part of the designated free zones. Mainland companies can trade freely across the UAE without restrictions.
5. How does business in the UAE benefit from a mainland license?
Business in the UAE on the mainland allows full access to the UAE market and the ability to work with both private and public clients.
6. What should I know before starting a UAE business?
A UAE business can be set up in either the mainland or a free zone. Your choice should depend on your business model, industry, and target market.
7. How is the UAE government involved in company formation?
The UAE government regulates and approves company formation through its licensing authorities, ensuring that you meet all business setup requirements.
8. Why does a mainland license sometimes require a UAE national?
Some activities in the mainland require a UAE national as a partner or sponsor, depending on the business activity and regulations.
9. What are the steps for starting a company in the UAE?
Starting a company in the UAE involves choosing a location, deciding your structure, getting approvals, and setting up a business that meets your business needs.
10. Can companies conduct business both in the UAE and internationally?
Yes, companies can conduct business within the UAE and internationally if their license allows it, but market access rules differ between free zones and mainland.
