Knowing what is a Dubai free zone and its differences from the mainland will help you decide where to establish your business. In both cases, there are advantages and disadvantages, as well as significant differences. In this article, we will show you what is free zone in UAE and what are the implications of establishing themselves there or on the continent. Let us see:

1. What is a Dubai Free Zone?

Many people wonder, what is a Dubai free zone? And the answer in principle is simple. These zones are special economic areas in which business owners can trade goods and services. In addition, tax rates in free zones are 0% and export and import exemptions are 100%.

Likewise, companies established in these areas enjoy 100% foreign ownership and privacy over the details of the business. This means that the information of the shareholders is confidential and is never disclosed. Therefore, according to the meaning of free zone, these zones offer certain advantages that we will expand on below.

1.1  Why opt for a free zone?

Business setup in UAE Free Zone allows you to earn great profits. Below, you can see the advantages of establishing your business in a free zone:

• Your company will not have to pay any type of import and export taxes or duties.
• You can have 100% foreign ownership.
• You do not need a physical office in the free zone, so you can use a virtual office.
• In most free zones your company will not have to go through any type of financial audit.
• You do not need a minimum capital to set up a company, only in areas such as the DIFC.
• Suitable office solutions are available for any type of business.
• You can have a business setup of multiple activities under a single business license.
• Dubai free zones have transport infrastructures that facilitate logistics.
• If you want to establish a branch on the mainland you can opt for a double license.

However, free zones also have some disadvantages, including the following:

• You can only do business within the free zone and outside the country unless you have a local distributor.
• Some visa applications are restricted within the free zone.
• Not all companies within these zones are exempt from audits.
• The legal structure of the entity limits the number of shareholders in the company.

2. What is a Dubai mainland?

Mainland refers to areas of Dubai that are not considered free zones and are regulated by the Department of Economic Development (DED). In addition, this authority is in charge of issuing licenses for certain commercial activities that include:

• Professional/service license.
• Commercial license.
• Industrial license.

Also, with a business setup in Dubai mainland, you can get 100% foreign ownership for certain business activities. This is an option considered by many foreign investors, although some prefer free zones.

2.1 Why choose the mainland?

As with free zones, establishing a company on the mainland also has its advantages. Some of them are the following:

• On the continent, some companies can apply for 100% foreign ownership.
• It is not mandatory to appoint a local service agent to register a personal license or a branch of a foreign company.
• By establishing a mainland company, you will be able to work with other mainland companies, local clients, and government agencies.
• You can locate business premises anywhere on the mainland and in the emirate where you obtained the license.
• With the DED license, you will be able to expand your business through branches anywhere in the UAE.
• You will be able to obtain faster and easier administrative processes.
• Through the establishment of a trading company, you will be able to transact internationally and expand to the whole world.

On the other hand, the establishment of the company on the mainland also has its disadvantages, just like in the free zone. Some of them are detailed below:

• If your company does not qualify for 100% foreign ownership, you will have to hand over a 51% stake to an Emirati national.
• The companies established on the mainland apply for the payment of the Value Added Tax (VAT) and the corporate tax that will come into force.
• You need a physical space of at least 140 square feet to license your company.

3. Differences between companies in free zones and continental ones

Since you know what is a Dubai free zone, and what is a continental zone, it is time to know their differences. Both areas have similarities in the way to establish your business but some differences will make you choose one or the other. Let us look at these differences:

• Company Property. All companies in free zones can be 100% foreign-owned but only certain activities on the mainland.
• Business scope. Companies from the mainland can trade with companies in all of the UAE and beyond. However, the Freezone license in Dubai only allows business in that same zone and internationally.
• Tax exception. Businesses in the free zone are exempt from taxes but those on the mainland must pay a 9% tax for most activities.
• Business configuration. For mainland Dubai company formation, you must be present in the country or through power of attorney. However, you can set up a company in a free zone completely remotely.
• Establishment time. In the free zones, the process takes between 3 and 5 days but on the mainland, it takes between 5 and 10 days.
• Companies in the mainland must have a physical address just like free zones but in the latter, some activities do not require a physical space.
• On the mainland, companies must present a financial audit annually, which does not happen in the majority of companies in free zones.
• Trade license. In the free zone, a company can obtain a license that combines commercial and professional activities but not on the mainland.
• Bank account. Opening a bank account is generally easier on the mainland, where companies with physical offices have advantages over virtual ones.
• In both cases, company details are available on request but there are options where ownership is not visible.

4. Start your UAE business with ConnectFZ

As a company with extensive experience, we can guide you on how to start a business in UAE free zone. Also, as you could see, this process offers you several advantages that outweigh the disadvantages. However, whichever location you choose, you will be able to take advantage of all the commercial advantages that the economy of the United Arab Emirates offers.

If you want to know what is a Dubai free zone and how to establish your business there you can contact us. In this case, you have 2 options, the first is the number +971 43 316 688 and the second is the email contact@connectfz.com.